Becton, Dickinson and Company (BDX) 2024 Q3 Earnings Call Summary

Optimistic Highlights

• Mid-Single-Digit Organic Revenue Growth: BD reported a 5.2% growth, demonstrating the durability of its portfolio and strength in innovations.
• Strong Volume and Share Gains: Growth was broad-based, reflecting significant gains across the portfolio.
• Significant Margin Increases: Enabled by the BD Excellence operating system, contributing to over 18% adjusted earnings per share growth.
• Free Cash Flow Growth: Achieved more than 100% year-to-date growth, reaching over 80% free cash flow conversion.
• Advancements in Key Growth Drivers: Notable progress in connected medication management, with a record number of Alaris pumps shipped, and double-digit growth in the PureWick platform.

Pessimistic Highlights

• Transitory Market Dynamics and Macro Factors: Challenges in BDB and PS, along with macro factors in China, impacted performance.
• Market Dynamics in China: Continued market dynamics in China contributed to a decrease in revenue from this region.
• Transitory Dynamics in Pharm Systems: Experienced expected customer inventory destocking, impacting revenue growth.

Company Outlook

• Raised Earnings Guidance for Fiscal 2024: Based on strong Q3 performance, BD has raised its adjusted diluted EPS guidance range to $13.05 to $13.15 on a reported basis.
• Confidence in Fiscal Year '25: Despite market dynamics, BD is confident in delivering strong performance, including exceeding a 25% adjusted operating margin goal and achieving double-digit EPS growth.
• Continued Investment and Growth: BD plans to continue investing in innovation, R&D, and business-building growth to support long-term objectives.

Q & A Highlights

• Q: Can you discuss the guidance for the fourth quarter, particularly around revenue and margins? (Robbie Marcus, from JPMorgan)

  A: Q4 implies upper 6% range organic revenue growth, driven by continued momentum in Alaris. Margin performance in Q3 was strong, and similar gross margin performance is expected in Q4, with a slight increase in operating expenses. (Chris DelOrefice)

• Q: How should we think about revenue growth into fiscal '25, especially considering current headwinds? (Travis Steed, from Bank of America)

  A: While not providing specific revenue guidance for '25 at this time, BD expects mid-single-digit growth this year despite market dynamics. The outlook for '25 remains positive, with continued focus on volume and share gains. (Tom Polen)

• Q: Could you provide more context on the growth drivers for the Medical Systems segment beyond Alaris? (David Roman, from Goldman Sachs)

  A: Growth drivers include consumables, next-gen Pyxis launch, pharmacy automation, and expansion into non-acute settings. BD is positioned well with a cadence of innovation across the connected medication management portfolio. (Mike Garrison)

• Q: On fiscal '25 guidance, does the 10% EPS growth include Critical Care, and how should we think about revenue growth and margin cadence? (Rick Wise, from Stifel)

  A: The 10% EPS growth for '25 is a starting point and includes Critical Care. The majority of margin improvement will come from gross margin, with a balanced phasing expected throughout the year. (Chris DelOrefice)

• Q: How are you viewing the destocking impact in Pharm Systems and the overall market dynamics in China? (Vijay Kumar, from Evercore ISI)

  A: Destocking in Pharm Systems is expected to be transitory, with strong underlying demand for biologics. In China, BD is taking a conservative stance but remains optimistic about long-term opportunities despite current market dynamics. (Tom Polen)