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Published on Aug 16, 2016
Shares
of Becton, Dickinson are up over 12% year-to-date and 47% in the past
two years. Despite the run-up in the stock - and a recent revenue
guidance cut - the medical technology provider has more room to run,
said Mark Freeman, portfolio manager for the Westwood Income Opportunity
Fund . 'We continue to see synergy from the CareFusion acquisition and
its end market exposure to the emerging markets is certainly driving the
stock,' said Freeman. Earlier this month, the Franklin Lakes, NJ-based
medical technology company reported better-than-expected second quarter
earnings, but lowered its full-year revenue guidance. Becton Dickinson
posted adjusted earnings of $2.35 per share, surpassing Wall Street's
estimated $2.21 per share. Revenue came in at $3.2 billion, falling just
short of analysts projected $3.21 billion. During the 2015 second
quarter, the company reported earnings of $2.05 per share on revenue of
$3.13 billion. Becton Dickinson now expects its 2016 revenues to
increase 21% to 21.5%, down from its prior estimates of 21.5% to 22%.
Adjusted earnings are projected to be in the range of $8.50 per share
and $8.57 per share, while Wall Street expects full-year earnings of
$8.55 per share. The Westwood Income Opportunity Fund is up 6.5% thus
far in 2016, according to Morningstar. The $2.4 billion fund has
returned an average of 25.3% annually over the past three years. The
fund sports a 1.45% trailing twelve month yield, according to
Morningstar. CVS Health Corporation is another one of Freeman's top
stock picks, despite it being flat year-to-date. He said it is
benefiting from its Omnicare acquisition and the rebranding of its
in-store Target pharmacies. Earlier this month the pharmacy company
reported earnings of $1.32 per share, surpassing analysts expected $1.30
per share. Revenue rose 17.6% to $43.73 billion, falling short of
analysts projected $44.28 billion. The company's pharmacy same store
sales were negatively impacted by about 355 basis points due to generic
drug introductions. During the quarter, the generic dispensing rate
increased 85.4% in its Pharmacy Services segment and increased 86.1% in
the Retail/LTC segment. CVS Health raised its full-year adjusted
earnings guidance to between $5.81 per share and $5.89 per share from in
the range of $5.73 per share to $5.88 per share. Finally, Freeman is a
fan of General Dynamics , up 11%, which had its own second quarter
revenue issues. The maker of Gulfstream jets, tanks and U.S. Navy ships,
reported a 2.8% decline in quarterly revenue, hurt by lower sales in
its combat systems and aerospace businesses. The company's revenue fell
to $7.67 billion in the second quarter from $7.88 billion a year
earlier. Net income rose to $758 million, or $2.44 per share, from $752
million, or $2.27 per share, a year earlier. 'General Dynamics is
trading at a discount to its peers due to concerns over its business jet
segment which we do not see as an issue,' said Freeman.
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