Becton, Dickinson(BDX) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $5.3 billion, reflecting a 0.4% increase year-on-year, with new BD growing by 2.5% [4][15] - Adjusted gross margin was 53.4%, down 140 basis points from the previous year, primarily due to tariffs [17] - Adjusted EPS was $2.91, a decrease of 15.2% year-on-year, driven mainly by the impact of tariffs [17][20] - Free cash flow for the quarter was $548 million, with a conversion rate of 66%, up from 59% in the prior year [18] Business Line Data and Key Metrics Changes - Medical Essentials saw mixed performance, with expected order timing dynamics affecting MDS, but continued share gains in the US vascular access management portfolio [15] - Connected Care delivered mid-single-digit growth, led by APM with high single-digit growth [15] - Biopharma Systems grew low single digits, with double-digit growth in biologics, particularly GLP-1s, offset by lower vaccine demand [16] - Interventional business experienced solid mid-single-digit growth, driven by high single-digit growth in UCC and double-digit growth in PureWick [16] Market Data and Key Metrics Changes - Growth was pressured by market dynamics in China, particularly in the life sciences segment, which declined due to headwinds in US point-of-care and difficult comparisons from the prior year [17] - The company expects the value-based procurement (VBP) in China to impact 80% of its portfolio by the end of 2026, with a projected headwind of about 250 basis points for the full year [36] Company Strategy and Development Direction - The company is focused on a balanced capital allocation strategy, prioritizing share repurchases and tuck-in M&A in high-growth markets [6][73] - The transformation into a pure-play med tech company is supported by divesting non-core assets and enhancing its portfolio through strategic acquisitions [7] - The company identified three key trends shaping healthcare: the rise of smart devices, the shift towards lower-cost care settings, and the growth in technologies addressing chronic diseases [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory of the business, maintaining a prudent approach to guidance for fiscal 2026, expecting low single-digit revenue growth [20] - The company anticipates that pricing dynamics will improve as VBP in China abates, potentially leading to positive pricing in the future [85] - Management highlighted strong execution in commercial initiatives and a robust innovation pipeline, which are expected to drive future growth [9][68] Other Important Information - The company completed a significant transaction with Waters, receiving a $4 billion cash distribution, with plans to allocate $2 billion for share repurchases and $2 billion for debt paydown [6][19] - The company has reduced its manufacturing network by nearly half, which is expected to lower costs and improve operational efficiency [13][50] Q&A Session Summary Question: Guidance for Q2 revenue and EPS - Management confirmed that Q2 guidance reflects modest timing benefits and remains aligned with Q1 performance, with no fundamental changes expected [23][44] Question: Structural changes affecting mid-single-digit growth - Management reassured that the fundamentals across the majority of the portfolio remain strong, with continued investment in high-growth areas [28] Question: Impact of Alaris and vaccines in China - Management indicated that Alaris is expected to improve in 2027, while vaccine impacts are anticipated to lessen over time [36][71] Question: Pricing environment and innovation impact - Management noted a stable pricing environment with slight positive trends expected, particularly as new product innovations are introduced [84][85]