Becton Dickinson (BDX)

Significant structural changes. Just spun off life sciences business, and merged that with WAT. So now it's a pure-play "med tech" company (per management). The "new" BDX is focused on higher-growth, higher-margin areas.

Before the changes, company looked for $15 EPS. For 2026, now looking at $12.50. Operating margin expectations have gone up from 21% to 25%. Fairly cheap at 14x. Wait-and-see. Changes add risk.

Waters Corp is buying part of their diagnostics business. Waters wants to be vertically integrated to compete with TMO and Danaher. Most of BDX's business lies with hospitals, which gives him pause because of the macro headwinds. He hasn't owned this in a few years. Let's get through the Waters deal, then he will assess BDX.

They just reported a disappointing quarter, plunging shares 18%. Many are giving up on it, but it's a buying opportunity. For decades, this was a reliable growth stock, but in the past 5 years have been sideways. They reported beats and raises last year. They sold their life sciences division to unlock value, a smart move. But at the same time, they issued mixed guidance, including slightly lower earnings due to tariffs; they said they would have made their guidance if not for the tariffs. Trades at a low 12x this year's estimates and have bought back many shares already this year.

90% of their products are disposable medical supplies. Problem was that during Covid, there were fewer operations, so sales fell and are slowing catching up--8-10% growth annually in the next few years, he thinks. Stock is cheap now, but the stock has done nothing for him. Has excellent prospects.

With a market cap of over $60 billion it is the largest player in the medical disposables sector with 25% market share. Growth stalled for two years during COVID but is accelerating now. Its profits are solid so there is lots of room for acquisitions and a start to buying back shares. Trades at 17X earnings and there should be double digit earnings growth ahead. Can be somewhat volatile.       Buy 16  Hold 2  Sell 0

Still really likes it. Major issue was surgeries on hold during Covid. Revenues declined, now returning to growth. Free cashflow yield ~4.5%. Earnings growth should return to double digits by end of 2024 and into the next couple of years. Unique. Compelling value.

Avoid TMO because their revenues are flattening. Both trade at a high PE. BDX hasn't done much in share movement. He'd rather pay more for Boston Scientific which performs better.

Share have been flattened, but it's now cheap. They tell a good story.

They have incredible reach with 90% of hospital patients touching one of their surgical and medical products

Pays a good dividend, is held by institutions, great earnings and has global exposure.

Healthcare supplier in North America.
90% of products are disposable - creates recurring revenue.
Expecting double digit earnings growth.
Fantastic M&A growth with good management team.
Dividend growing at a regular pace.