Becton Dickinson is a profitable lifeline

Posted Jul 20th 2009 1:40PM by Joseph Lazzaro
Filed under: Stocks to Buy

Look for Becton Dickenson to land on its feet following health care reform. I'm reiterating my Buy rating for Becton Dickinson (NYSE: BDX), first recommended on March 17, 2009 at a price of $65.66.

While other health care players are likely to sustain revenue cuts as part of health care reform, Becton, a top manufacturer of syringes, injection devices, and IV catheters, surgical instruments, and elastic bandages, among other products, will likely see only a temporarily revenue dip. The FY2009/FY2010 EPS estimates for BDX are $4.93 to $5.41.

Revenue from hospital sales will likely decline, at least initially, on a per unit basis, but the longer-term trend suggests this can be made up with increased business. If universal health care is achieved, there will be up to 47 million new eligible patients. Translation: less money per device, but many more devices will be sold.

Stock Analysis: Becton Dickinson is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in BDX now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your BDX position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $43.

- -

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: BDX, Becton Dickinson