An Okay Fiscal Q2
BDX's quality notwithstanding, the fiscal second quarter was okay. Revenue rose almost 5% on a constant currency basis, with diagnostics (up 6.5%) and medical (4.9%) providing the growth and biosciences (up 0.4%) struggling to hold its own. The company appeared to do well with its diabetes and pharmaceutical systems businesses, and strong sales of diagnostic systems are an encouraging sign (they will require future consumables to operate). Even the biosciences performance wasn't so bad once the headwinds from Japan and tough comps created by the year-ago flu outbreak and stimulus spending are considered. (For more, see A Checklist For Successful Medical Technology Investment.)
Profitability performance was likewise decent. Gross margin was slightly disappointing, as it improved just 10 basis points from last year. Adjusted operating income grew about 6%, and the margin shrunk very slightly, largely as the company upped its R&D spending. All in all, while the company reported an 8-cent beat relative to the average analyst estimate, 5 cents of that seems to have come from taxes and sharecount reduction, so it was more or less an in-line quarter.
Business Should Be Looking Up
Healthcare has been in the doldrums for some time now as job losses, co-payments and general anxieties have kept people away from the doctor's office. Investors can see the impact across the sector - whether it's Hologic (Nasdaq:HOLX), Johnson & Johnson (NYSE:JNJ), Abbott (NYSE:ABT) or any other patient-facing company, procedure volumes are down.
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