BECTON DICKINSON & CO (BDX)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY25 revenue was $5.27B (+4.5% reported; +6.0% FXN; +0.9% organic), below internal expectations, but adjusted EPS of $3.35 grew 5.7% with significant margin expansion; GAAP EPS was $1.07 .
• Versus S&P Global consensus, adjusted EPS beat ($3.35 vs $3.28*) while revenue missed ($5.27B vs $5.35B*). Management offset top-line softness through BD Excellence, delivering adjusted gross margin 54.9% and adjusted operating margin 24.9% .
• FY25 guidance updated: GAAP revenues to ~$21.8–$21.9B (low end raised), organic growth lowered to 3.0–3.5% (from 4.0–4.5%), and adjusted EPS to $14.06–$14.34 including ~$0.25 tariff impact; adjusted tax rate guided to ~14–14.5% .
• Key catalysts cited: tariff mitigation and supply chain actions, continued Alaris progress, APM contribution becoming organic in Q4, strong PureWick and Phasix momentum, and the planned separation of Biosciences & Diagnostic Solutions, on track for announcement this summer .

What Went Well and What Went Wrong

What Went Well

• Margin execution: “ability to exceed our earnings expectations through quality gross margin improvement,” with adjusted gross margin 54.9% (+190 bps YoY) and adjusted operating margin 24.9% (+60 bps YoY) driven by BD Excellence .
• MedTech momentum: double-digit Infusion growth (Alaris) and PureWick strength; Surgery saw double-digit Phasix growth; Pharmaceuticals Systems returned to growth on Biologics/GLP‑1 demand .
• Strategic initiatives: intent to invest $2.5B in U.S. manufacturing over five years to reinforce resilience and tariff mitigation leverage; next Alaris 510(k) clearance (cybersecurity + EtCO2 module) .

What Went Wrong

• Life Sciences softness: lower BDB instrument demand amid research funding cuts; DS saw slower-than-expected recovery in BACTEC testing post supply resolution, pressuring Q2 organic growth to 0.9% .
• China headwinds: volume-based procurement and macro softness led management to shift FY25 China outlook from mid-single-digit to high-single-digit decline, impacting multiple platforms .
• Tariffs: management now assumes ~$90M FY25 tariff expense (≈$0.25 EPS), largely Q4-weighted, prompting adjusted EPS guidance reduction despite operational offsets .

Financial Results

Segment revenue breakdown (Q2 FY25 vs Q2 FY24):

Geography revenue breakdown (Q2 FY25 vs Q2 FY24):

KPIs and operating metrics (Q2 FY25):

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Amid a difficult operating environment impacting near-term organic revenue growth, our Q2 results reflect the strength of our business model and ability to exceed our earnings expectations through quality gross margin improvement.” – Tom Polen, CEO .
• “We delivered strong adjusted gross margin of 54.9% and adjusted operating margin of 24.9%… fueled by momentum in BD Excellence.” – Chris DelOrefice, CFO .
• “We assume $90 million of tariff expense in FY ’25… we only have about 3 months on average of tariffs in our guide… we’re not done in terms of efforts to mitigate.” – Chris DelOrefice .
• “We announced our intent to invest $2.5 billion in U.S. manufacturing over the next 5 years.” – Tom Polen .
• “The separation process for our Biosciences and Diagnostics business is advancing well and on schedule… expect to announce the transaction this summer.” – Tom Polen .

Q&A Highlights

• Tariff mitigation and EPS impact: ~$90M FY25 expense net of mitigation; ~$0.25 EPS impact predominantly Q4; annualization beyond FY25 depends on rates and further mitigation .
• Second-half growth drivers: Organic growth expected ~3% in Q3 and just over 5% in Q4, driven equally by APM becoming organic, Pharm Systems strength (Biologics/GLP‑1), Interventional high-single-digit growth (Surgery easy comps), and BDB launch of FACSDiscover A8 .
• Macro sensitivity and guidance philosophy: Life Sciences instrument demand impacted by government funding shifts (NIH, Europe), and China VoBP; MedTech ex licensing remains mid-single-digit despite headwinds .
• BD Excellence and culture: Lean/kaizen expansion into R&D and commercial functions; enhances productivity and engagement while freeing capacity .
• AI internal optimization: Focused AI pilots in manufacturing scheduling, inventory management, and back-office (expense review automation); product integrations in APM and MMS .

Estimates Context

Values marked with * retrieved from S&P Global.

Where estimates may need to adjust:

• Life Sciences weakness and China VoBP likely push FY25 organic revenue forecasts lower; EPS resilience from margins offsets some revenue shortfall but tariffs introduce a new 2% EPS drag at midpoint .

Key Takeaways for Investors

• Earnings quality remains strong despite top-line pressures: margin expansion via BD Excellence enabled EPS beat and supports confidence in compounding earnings even with tariffs .
• Near-term growth re-acceleration hinges on H2 drivers: APM anniversaries into organic, Biologics/GLP‑1 orders in Pharm Systems, PureWick and Phasix momentum, and BDB’s FACSDiscover A8 launch .
• Tariffs are a manageable, time-weighted headwind: ~$90M FY25 expense; management is actively shifting sourcing, inventory, and pricing levers to mitigate beyond FY25 .
• China and research funding are the principal top-line risks: continued VoBP pressure and slower instrument demand likely constrain Life Sciences growth through FY25 .
• Capital deployment supports shareholder value: $750M buybacks YTD, dividend continuity ($1.04/share), with net leverage 2.9x and H2-weighted cash generation .
• Structural portfolio move: planned separation of Biosciences & Diagnostic Solutions remains on track and could unlock value and sharpen “New BD” MedTech focus .
• Trading lens: Expect sensitivity to tariff headlines and H2 execution; EPS stability via margins/mitigation may cushion downside from organic growth reset, while proof points in Alaris/APM/PureWick/Phasix and separation milestones can act as positive catalysts .

Note: All S&P Global consensus values are marked with * and provided by S&P Global.