Tickers in this Article: BDX, HOLX, JNJ, ABT, GPRO, QGEN, CPHD
There is a relatively small list of companies like Becton Dickinson (NYSE:BDX) - companies that will leave investors fuming when they miss the relatively few opportunities they give investors to buy on the cheap. Becton Dickinson is not going to impress anybody with stunning growth, but the quality is there and this global medical technology player is a great cornerstone holding for investors that prefer the long-term buy-and-hold approach.

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An Okay Fiscal Q2
BDX's quality notwithstanding, the fiscal second quarter was okay. Revenue rose almost 5% on a constant currency basis, with diagnostics (up 6.5%) and medical (4.9%) providing the growth and biosciences (up 0.4%) struggling to hold its own. The company appeared to do well with its diabetes and pharmaceutical systems businesses, and strong sales of diagnostic systems are an encouraging sign (they will require future consumables to operate). Even the biosciences performance wasn't so bad once the headwinds from Japan and tough comps created by the year-ago flu outbreak and stimulus spending are considered. (For more, see A Checklist For Successful Medical Technology Investment.)

Profitability performance was likewise decent. Gross margin was slightly disappointing, as it improved just 10 basis points from last year. Adjusted operating income grew about 6%, and the margin shrunk very slightly, largely as the company upped its R&D spending. All in all, while the company reported an 8-cent beat relative to the average analyst estimate, 5 cents of that seems to have come from taxes and sharecount reduction, so it was more or less an in-line quarter.

Business Should Be Looking Up
Healthcare has been in the doldrums for some time now as job losses, co-payments and general anxieties have kept people away from the doctor's office. Investors can see the impact across the sector - whether it's Hologic (Nasdaq:HOLX), Johnson & Johnson (NYSE:JNJ), Abbott (NYSE:ABT) or any other patient-facing company, procedure volumes are down.

Unfortunately, when procedure volumes drop, so too do those lucrative recurrent revenue streams that come from single-use device and test sales. Making matters even worse, hospitals have had to cut back on capital budgets, so it has been an all-around malaise for these companies.

Business is looking up, though. Procedure counts are starting to tick up again and a lot of companies will be glad to be rid of the difficult flu-related comparisons. Better still, Becton Dickinson has great exposure to emerging markets (57% of its Q2 sales were outside the U.S.) and growing opportunities like diabetes care in China should help the growth picture. On top of that, the rollout of new products like the BD Max give the company the opportunity to gain share and grow the business further.

The Bottom Line
If volume is picking up in the testing labs, that should be good news not only for BDX and HOLX, but also other testing names like Gen-Probe (Nasdaq:GPRO), Qiagen (Nasdaq: QGEN) and Cepheid (Nasdaq:CPHD). What's more, M&A activity is picking up again and both Gen-Probe and Cepheid could be appealing candidates to companies that want to expand their diagnostics business.

For BDX, though, the time really does not seem right. It's absolutely a high-quality name and a fine stock to hold. Trading very near fair value, though, it's no bargain. With other high-quality healthcare names like Covidien (NYSE:COV), Stryker (NYSE:SYK) and Abbott offering great franchises and better appreciation potential, it is hard to argue for pushing BDX to the top of the list. All the same, stocks can go on sale for no apparent reason, and investors should not miss the chance to get BDX on the cheap if such an opportunity arises. (For more, see The Value Investor's Handbook.)

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