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    BDX
    Earnings call· Mar 2025(Q2 FY25)

    BECTON DICKINSON Q2 FY25 earnings call BDX

    May 1, 2025 Source

    Executive summary

    Becton, Dickinson and Company Q2 FY25 — Revenue Miss Offset by Strong EPS and Margin Expansion

    Becton, Dickinson and Company reported Q2 FY25 organic revenue growth of 0.9%, falling short of expectations due to reduced research funding in Bioscience and slower recovery in BACTEC blood culture testing. Despite top-line challenges, the company exceeded adjusted EPS expectations, delivering 5.7% growth, fueled by significant gross and operating margin expansion from BD Excellence initiatives. Management is taking decisive actions to reaccelerate growth in the second half, including strategic investments and new product launches, while navigating tariff impacts and progressing with the Life Sciences separation.

    Highlights

    5

    • Adjusted EPS of $3.35, growing 5.7% year-over-year, exceeded expectations.

    • Adjusted gross margin expanded by 190 basis points to 54.9%, driven by BD Excellence initiatives.

    • Adjusted operating margin increased by 60 basis points to 24.9% year-over-year.

    • Pharm Systems returned to growth in Q2, fueled by Biologics and GLP-1 orders.

    • The Life Sciences separation process is advancing well and remains on schedule.

    Concerns

    5

    • Revenues grew 0.9% organically, below expectations, due to market dynamics in Life Sciences.

    • Bioscience performance was impacted by a reduction in global research funding, including U.S. research grant cuts.

    • Diagnostics (BACTEC blood culture) experienced softness due to a slower-than-expected return to prior testing levels.

    • Full-year organic revenue growth guidance was lowered to 3% to 3.5%.

    • An estimated $90 million tariff expense in FY25, predominantly in Q4, is expected to impact adjusted EPS by $0.25.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year organic revenue growth
    3% to 3.5%
    high materiality
    Medium
    Full-year total revenue
    $21.8B to $21.9B
    high materiality
    Medium
    Full-year adjusted effective tax rate
    14% to 14.5%
    medium materiality
    High
    Full-year adjusted diluted EPS (pre-tariff)
    $14.30 to $14.60
    high materiality
    High
    Full-year adjusted diluted EPS
    $14.06 to $14.34
    high materiality
    Medium
    Q3 adjusted operating margin
    about 24.5%
    medium materiality
    High
    Q3 organic revenue growth
    nearly 3%
    high materiality
    High
    Q4 organic revenue growth
    just over 5%
    high materiality
    High
    Share repurchases
    $1B
    medium materiality
    High
    Life Sciences separation transaction form announcement
    details on specific form of transaction
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    MedTech (ex-Diagnostics & Bioscience)
    Includes a headwind of approximately 170 basis points from the prior year licensing compare. Strength across many key platforms including Alaris, Biologics, PureWick, and Phasix.
    		—1.9% organic——
    EMEA
    Partially offset total company organic growth. Impacted by uncertainty on government spending, with orders put on pause.
    		—decline——
    China
    Double-digit decrease as expected, partially offsetting total company organic growth. Impacted by volume-based procurement in BDI and research spend pressure.
    		—double-digit decrease——

    Operational metrics

    14
    Adjusted Gross Margin
    54.9%up 190 bps YoY
    Q2 FY25

    Fueled by momentum in BD Excellence driven by manufacturing productivity, improved OEE, waste, and network optimization.

    Adjusted Operating Margin
    24.9%up 60 bps YoY
    Q2 FY25

    Enabled growth investments across SSG&A and R&D.

    Number of Kaizens completed
    over 600nearly tripling year-on-year
    YTD FY25

    Scaling across the organization, beginning to embed in R&D and commercial operations.

    Share Repurchases
    $750M
    YTD FY25

    Part of commitment to deploy $1 billion towards share repurchases by end of calendar year.

    U.S. Revenue from Domestic/Tariff-Exempt Sources
    nearly 80%
    Current

    BD is the largest U.S. manufacturer in med tech with 28 plants. Strengthens position against tariffs.

    U.S. Revenue from China Imports
    less than 1%
    Current

    Low exposure to direct China imports. Most significant tariff exposure is on U.S. exports to China.

    FX Headwind to Revenue
    $20Mimprovement of $230M from prior guidance
    FY25

    Based on current spot rates for illustrative purposes.

    FX Headwind to EPS
    $0.0540 bps
    FY25

    Absorbed within adjusted EPS guidance.

    Organic Growth Headwind from Licensing
    150 bps
    Q2 FY25

    Previously disclosed headwind from outsized prior year licensing comparison.

    Growth
    returned to growth
    Q2 FY25

    Trending in line with full-year expectations, driven by Biologics (primarily GLP-1s).

    Growth
    strong double-digit growth
    Q2 FY25

    Continued adoption of Male and Female portfolios. PureWick Male had its strongest quarter post launch. PureWick Flex continued strong trajectory in acute and direct-to-consumer at-home channel.

    Growth
    double-digit growth
    Q2 FY25

    Strong market adoption for hernia transformation strategy (synthetic mesh to bioresorbable mesh).

    Organic Growth
    high single-digit decline
    FY25

    Updated from original mid-single-digit decline, reflecting incremental volume-based procurement and research spend pressure.

    U.S. Manufacturing Investment
    $2.5B
    Next 5 years

    Intent to invest to further strengthen position and commitment to resilient U.S. health care system.

    Industry KPIs

    4
    MetricValueDetails
    Tariff impact$90MUSD
    New product launch ramp—
    FCF conversion leverage guidance2.9xx
    Segment franchise organic growth1.9%%

    Product announcements

    5
    ProductTypeDetails
    Phasix ST Umbilicallaunch
    BD Alaris enhancementsmilestone
    BD neXuslaunch
    BD FACSDiscover A8launch
    CentroVena Onelaunch

    Risks & headwinds

    5
    Reduction in global research fundingQ2 FY25 and likely persist through FY '25

    impacted Bioscience performance; pressure on research spending increased in Q2 and will likely persist through FY '25; cuts to U.S. research grants announced in February

    Mitigation: Win rate strong for innovative FACS portfolio where instrument funding is available; received first export license to resume selling high-parameter flow cytometers to China in April.

    Slower recovery in BACTEC blood culture testingQ2 FY25

    softness in our BACTEC blood culture business; slower than expected to move back to prior testing levels

    Mitigation: Team worked with supplier to return to full production and historical inventory levels; partnering with customers to accelerate readoption.

    TariffsFY '25, predominantly Q4; beyond FY '25

    assume $90 million of tariff expense in FY '25 or $0.25 predominantly weighted to Q4; less than 1% of U.S. revenue is sourced from China; most significant tariff exposure comes from China tariffs placed on products manufactured in the U.S. and exported to China

    Mitigation: Proactively driving mitigation actions that have already significantly reduced near-term tariff risk; shifting supply flows (e.g., Vacutainers from U.S. to Europe for China), optimizing supplier locations, leveraging dual sourcing options; accelerate transition to China Flush plant; put G&A focused cost containment measures in place; balanced approach on pricing; BD Excellence to protect margins and preserve investment.

    Volume-based procurement (VoBP) in ChinaQ2 FY25; FY25

    partially offset by volume-based procurement in China (for PI platforms); incremental volume-based procurement in areas, in particular, BDI

    Mitigation: Adjusted China outlook to high single-digit decline to reflect this dynamic.

    Macro environment volatilitynear-term; beyond 2025

    high degree of uncertainty on the future of the tariff environment; macro landscape, which should evolve pretty quickly and dynamically

    Mitigation: Focused on executing strategy while taking every action to mitigate tariffs; BD Excellence momentum to deliver strong results.

    What to watch in Q3 FY25

    5

    Organic revenue growth

    Q3 FY25
    Current0.9% in Q2 FY25
    Targetnearly 3% in Q3 FY25

    Why it matters

    Verifying the sequential improvement in organic growth is crucial for validating management's confidence in the second-half acceleration strategy.

    As we think about the quarterly split, we expect year-over-year organic growth to improve sequentially in Q3 to nearly 3% and further in Q4 due to the benefits of the key growth drivers Tom referenced earlier in his remarks as well as easing comps.

    Q&A highlights

    6

    Is the $0.25 EPS tariff impact net or gross? How should it be annualized for FY26, considering mitigation efforts?

    The $0.25 EPS impact is net of significant mitigation efforts in FY25, including inventory movements and sourcing alternatives. While simple annualization is not appropriate, the current guidance only includes about 3 months of tariffs, implying a higher impact if not further mitigated in FY26. Management is confident in continued mitigation efforts.

    “this is a net number after significant work to mitigate tariffs on multiple fronts, both short term, long term.”

    asked by Larry Biegelsen · answered by Christopher DelOrefice

    2 min read5 chapters

    Detailed Narrative

    01

    Q2 Revenue Performance and Headwinds

    BD's Q2 FY25 revenues grew 0.9% organically, falling below expectations primarily due to market dynamics in Life Sciences. This included a reduction in global research funding, particularly U.S. research grants announced in February, impacting Bioscience instrument sales. Additionally, the Diagnostics BACTEC blood culture business experienced slower-than-expected recovery in testing levels following prior supplier challenges, despite full supply restoration.

    02

    BD Excellence Driving Margin Expansion

    The company demonstrated strong P&L execution, exceeding adjusted EPS expectations with 5.7% growth. This was largely driven by robust margin expansion, with adjusted gross margin increasing by 190 basis points to 54.9% and adjusted operating margin by 60 basis points to 24.9%. BD Excellence initiatives, including nearly tripling kaizens year-on-year to over 600 year-to-date, are scaling across manufacturing and beginning to embed in R&D and commercial operations, serving as a key catalyst for future margin accretion and investment.

    03

    Strategic Actions to Reaccelerate Growth

    To address the Q2 revenue softness, BD is implementing decisive actions to drive growth in the second half of FY25. This includes anticipated continued momentum in Pharm Systems, fueled by Biologics and GLP-1 orders, and strategic investments behind Alaris and APM. The Interventional business is expected to deliver strong growth with commercial investments in PureWick and Phasix, alongside new product launches like Phasix Umbilical, FACSDiscover A8, and CentroVena One.

    04

    Navigating Tariff Environment

    BD is proactively managing tariff impact🌐s, assuming a $90 million expense in FY25, predominantly in Q4. The company highlights its position as the largest U.S. med tech manufacturer, with nearly 80% of U.S. revenue sourced domestically or tariff-exempt. Mitigation actions include inventory positioning, shifting supply flows (e.g., Vacutainers from U.S. to Europe for China), optimizing supplier locations, and accelerating the ramp-up of its China Flush plant. BD also announced an intent to invest $2.5 billion in U.S. manufacturing over the next five years.

    05

    Life Sciences Separation and Innovation Pipeline

    The planned separation of the Biosciences and Diagnostics business is advancing on schedule, with strong interest, and details on the transaction form are expected this summer. BD continues to make significant pipeline advances, including the launch of Phasix ST Umbilical in Interventional, 510(k) clearance for BD Alaris enhancements (including cybersecurity and EtCO2 module) and launch of BD neXus in Medical, and the upcoming launch of BD FACSDiscover A8 in Life Sciences.

    AI-generated summary of the company’s earnings call. Not investment advice.