By Sam Boughedda
KeyBanc Capital Markets analysts upgraded shares of Becton Dickinson (NYSE:BDX) to Overweight from Sector Weight with a price target of $304 per share in a note to clients on Wednesday.
The analysts said the stock finally appears to be capable of a sustainable breakout after five years of being fully rangebound due to "more consistent execution toward LT financial targets and a reasonable valuation."
"More specifically: 1) we see several positive drivers supporting durable 5.5%+ FXN revenue growth the next several years, with Alaris representing a potential source of upside; 2) it appears well on track to meet or exceed 25% op margins in FY25, likely with some optionality around growth reinvestments; and 3) there is flexibility for balanced capital allocation, including strategically scaled M&A," the analysts wrote.
They added that BDX is progressing toward increasing the overall WAMGR of its portfolio while it has benefited from excess revenue of its COVID-19 test, which it reinvested toward growth initiatives through FY22.
Furthermore, "the cadence of launches is weighted toward high-growth end markets, and BDX estimates sales from FY21-FY25 new products could double vs. the 5 years prior ($1.7B in FY25 vs. $0.8B in FY21)," analysts explained. "Also supporting growth has been a focus on driving positive pricing, which is spread across geographies/segments and is now a LT organizational capability that includes training and incentives for its salesforce."
"Finally, while timing is uncertain and management remains stoic in communication, eventually Alaris's full reintroduction to market is a likely upside catalyst and incremental to its current growth profile over several years."