Earnings call transcript: Becton Dickinson Q3 2025 earnings beat forecasts, stock surges

Becton Dickinson and Co (BDX) reported its third-quarter earnings for 2025, showcasing a strong financial performance that exceeded market expectations. The company posted an adjusted earnings per share (EPS) of $3.68, surpassing the forecasted $3.40, marking an 8.24% surprise. Revenue reached $5.5 billion, slightly above the expected $5.49 billion. Following the announcement, Becton Dickinson’s stock surged by 8.11% in pre-market trading, reflecting investor confidence in the company’s robust growth and strategic initiatives. According to InvestingPro analysis, BDX currently appears undervalued, with a "GOOD" overall financial health score, suggesting potential upside for investors. The platform offers 12 additional exclusive insights about BDX’s financial position and market outlook.

Key Takeaways

• Becton Dickinson’s Q3 EPS of $3.68 exceeded forecasts by 8.24%.
• Revenue for the quarter was $5.5 billion, up 8.5% year-over-year.
• The stock price increased by 8.11% in pre-market trading.
• The company launched several new products and expanded production capacity.
• Fiscal 2025 revenue growth is projected between 7.8% and 8.3%.

Company Performance

Becton Dickinson reported solid performance in the third quarter of 2025, with significant revenue growth driven by strong sales in the U.S. and Greater Asia. The company’s focus on innovation and operational excellence contributed to an increase in both gross and operating margins. The launch of new products across its Life Sciences, Medical, and Connected Care segments further bolstered its market position.

Financial Highlights

• Revenue: $5.5 billion, up 8.5% year-over-year
• Adjusted EPS: $3.68, a 5.1% increase from the previous year
• Adjusted Gross Margin: 54.8%, up 50 basis points year-over-year
• Adjusted Operating Margin: 25.8%, up 60 basis points year-over-year
• Free Cash Flows: Approximately $1.7 billion year-to-date

Earnings vs. Forecast

Becton Dickinson’s Q3 EPS of $3.68 exceeded the consensus forecast of $3.40, resulting in an 8.24% earnings surprise. This performance marks a continuation of the company’s trend of surpassing market expectations, as seen in previous quarters. The revenue of $5.5 billion also slightly surpassed the forecasted $5.49 billion, reinforcing the company’s growth trajectory.

Market Reaction

The company’s stock price rose by 8.11% in pre-market trading following the earnings announcement, reaching $187.31. This increase reflects a positive investor sentiment, driven by the company’s better-than-expected earnings and revenue performance. With a beta of 0.22, BDX typically demonstrates low price volatility, making it an potentially attractive option for risk-averse investors. The stock is currently trading near its 52-week low, presenting what InvestingPro analysis suggests could be an attractive entry point for long-term investors.

Outlook & Guidance

For fiscal 2025, Becton Dickinson projects total revenue growth between 7.8% and 8.3%, with organic revenue growth of 3% to 3.5%. The adjusted EPS guidance is set between $14.30 and $14.45, representing a 9.4% growth. The company also anticipates a $275 million tariff impact in fiscal 2026 but remains committed to achieving a 25% operating margin by 2025.

Executive Commentary

CEO Tom Polin expressed satisfaction with the company’s performance, stating, "We are pleased with the performance across a number of areas." He emphasized the role of BD Excellence in driving value creation, noting, "BD Excellence remains a flywheel for value creation." Polin also highlighted the company’s ongoing efforts in innovation and market expansion.

Risks and Challenges

• Continued market headwinds in China could impact future growth.
• Volatility in vaccine and generic anticoagulant markets may pose challenges.
• Tariff impacts are anticipated to affect fiscal 2026 financials.
• Supply chain disruptions could affect production and delivery timelines.
• Macro-economic pressures, including inflation and interest rates, may influence costs.

Q&A

During the earnings call, analysts inquired about the growth potential of Becton Dickinson’s RemainCo and the company’s separation strategy with Waters. Executives detailed tariff mitigation efforts and highlighted continued investments in growth areas, addressing concerns about future market conditions and strategic priorities.

Full transcript - Becton Dickinson and Co (BDX) Q3 2025:

Conference Operator: Hello and welcome to BD’s Third Fiscal Quarter twenty twenty five Earnings Call. At the request of BD, today’s call is being recorded and will be available for replay on BD’s Investor Relations website, investors.bd.com or by phone at (800) 839-1246 for domestic calls and area code 064 for international. For today’s call, all parties have been placed in a listen only mode until the question and answer session. I will now turn the call over to Greg Rodinos, Senior Vice President, Treasurer and Head of Investor Relations.

Greg Roditis, Senior Vice President, Treasurer and Head of Investor Relations, BD: Good morning and welcome to BD’s earnings call. I’m Greg Roditis, Senior Vice President, Treasurer and Head of Investor Relations. Thank you for joining us. This call is being made available via audio webcast at bd.com. Earlier this morning, BD released its results for the 2025.

The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today’s call are Tom Polin, BD’s Chairman, Chief Executive Officer and President and Chris Dolorfis, Executive Vice President and Chief Financial Officer. Following this morning’s prepared remarks, Tom and Chris will be joined for Q and A by our segment presidents: Mike Garrison, President of the Medical segment Mike Feld, President of the Life Sciences segment Rick Bird, President of the Interventional segment and Bilal Muslin, President of our Future Connected Care segment. Before we get started, I want to remind you that we will be making forward looking statements. You can read the disclaimer in our earnings release and the disclosures in our SEC filings on our Investor Relations website.

Unless otherwise specified, all comparisons will be made on a year on year basis versus a relevant fiscal period. Revenue percentage changes are on an adjusted FX neutral basis unless otherwise noted. Reconciliations between GAAP and non GAAP measures are included in the appendices of his earnings release and presentation. With that, I am pleased to turn it over to Tom.

Tom Polin, Chairman, Chief Executive Officer and President, BD: Thank you, Greg, good morning, everyone. As you saw in our press release, in Q3, we sequentially improved growth across the company. We accelerated commercial initiatives and increased our organic growth trajectory through market headwinds. We continued our strong track record of executing BD excellence to drive gross margin upside. Additionally, we fulfilled our commitment to announce a definitive agreement to separate our Biosciences and Diagnostics business through a transaction that we believe will unlock meaningful value for our shareholders.

Turning to details of the quarter. Revenue grew 8.5% to $5,500,000,000 or 3% organic. New BD organic growth was 4%. Our BD Excellence lean operating system remains a flywheel for value creation, delivering Q3 adjusted gross margin of 54.8%, up 50 basis points year over year. Adjusted operating margin of 25.8%, up 60 basis points year over year and supported delivering $3.68 in adjusted diluted EPS, each exceeded our expectations.

As we communicated last quarter, we’ve been taking actions to accelerate revenue growth. This includes further investing in growth opportunities by adding selling and marketing resources, capitalizing on new product launches and continuing to drive BD excellence to optimize product supply. The combination of these actions has already begun delivering results as you saw play out in a number of key areas. Farm systems improved sequentially to nearly 5% growth as we delivered another quarter of double digit growth in Biologics. BDI accelerated to nearly 7% growth in the quarter, with double digit growth in UCC and mid single digit growth in PI and Surgery.

APM delivered double digit pro form a growth ahead of our deal model. As expected, growth in both BDB and DS increased sequentially by approximately two fifty basis points. This performance allowed us to deliver sequentially improved growth across the company through continued market headwinds in China, certain sub segments of farm systems such as vaccines and the life science research market. Building off our Q3 performance, we reaffirmed our organic revenue guide range for the year and raised our earnings guidance $0.18 at the midpoint. Turning to an update on several strategic initiatives.

As committed last month, we announced that we entered into an agreement to combine our Biosciences and Diagnostic Solutions business with Waters through a tax efficient Reverse Morris Trust. We strongly believe that Waters is the right partner and firmly believe in management strategy and ability to unlock the value of these assets. The transaction is progressing well towards an expected closing around the end of the 2026. We’re pleased to have named Brooke Story to lead BD’s Integration and Separation Management Office. Brooke has most recently led the integration of Edwards Critical Care, which she will continue to oversee as part of her expanded scope.

Her rich experience, including her tenure as President of the Diagnostics business, makes her the ideal choice for this role. Upon closing, New BD will be established as a scaled pure play medical technology company with uniquely leading positions and a best in class consumable revenue profile of over 90%, a deep innovation pipeline and strong margin expansion fueled by BD Excellence. The company’s strong growth and earnings profile will be supported by enhanced capital allocation with an emphasis on share buybacks as we continue to pay competitive dividends and execute focused tuck in M and A. As previously communicated and aligned with our emphasis on share buybacks, we intend to use at least half of the approximately $4,000,000,000 cash distribution from Waters to buy back shares, with the balance for debt repayment as we continue to progress toward our 2.5 times long term net leverage target. Moving to an update on our innovation pipeline.

We had some great launches and milestones this quarter, as investment decisions we made at the start of BD twenty twenty five are now advancing to market. In BD Life Sciences, BDBs innovation super cycle continued in Q3. We saw strong traction with the successful launch of FaxDiscover A8, which features breakthrough spectral and real time cell imaging technologies and has exceeded our sales targets since launch. We’re also launching our first made in China for China clinical analyzer this quarter. BDB’s R and D pipeline includes over 25 new product launches across instruments, reagents and informatics, as well as continued expansion in the high growth single cell multiomics segment.

In DS, as blood culture momentum continues, we are excited about the next generation Bactech launch in fiscal twenty twenty six, which is expected to drive renewal of legacy systems and accelerate share gains. In Molecular, innovation remains focused on leveraging the increased BD MAX installed base with continued growth of IVD revenue per system. Most customers today use just under three assays, while top users adopt five or more of our 14 assay menu. Our commercial team is focused on driving further menu adoption supported by the upcoming launch of several new assays in 2026. Also in molecular, our BD core platform is addressing a new $1,000,000,000 market for HPV testing.

And last week, we submitted to FDA the first ever at home self collection kit for HPV screening using a simple dry swab. We expect approval in mid FY twenty twenty six. Today in The U.

: S,

Tom Polin, Chairman, Chief Executive Officer and President, BD: approximately thirty percent of women have not been screened as recommended. And this population represents over sixty percent of cervical cancer deaths. We believe at home self collection can significantly improve access to screening and play an important role in reversing still rising deaths from cervical cancer. Moving to BD Medical. We recently announced that our BD Libertas wearable injector has entered into first into its first pharma sponsored clinical trial.

This device is being used for self injection of complex biologic drugs by patients at home, rather than going to an infusion clinic. We also announced in another BD sponsored studies that one hundred percent of study participants would likely use the Libertas device if prescribed. Separately, we continue to expand signed agreements for GLP-one, now reaching over 70 signed agreements for GLP-one biosimilars. Biologics now represent 50 of total farm system sales. We’re exceptionally well positioned to capitalize on the wave of new molecules coming to market over the next decade.

Moving to our portfolio of Connected Care solutions. Within MMS, we began limited commercial release of our new BD Pyxis Pro, completing installs at several customer sites with our BD Ancata Enterprise AI software to follow this quarter. Pyxis Pro is our first redesigned hardware platform and includes multiple new features designed to improve nurse workflow, enhance drug availability for patients and transform productivity using artificial intelligence. Pyxis Pro is our first product line to feed data into our new Encada AI platform and will be followed by Alaris, HemoSphere Ultamonitor and other devices, creating future datasets, which will be unique in our industry. While still very early in our introduction, we are looking forward to this innovative journey over the next coming years.

Following the APM acquisition, we immediately began investing in capabilities to develop increased connectivity and interaction between our Alaris infusion system and our HemoSphere Alti to High Hemodynamic Monitoring System, recognizing that critical care nurses can spend 50% of their time manually adjusting infusions today. We’re advancing through early milestones in our innovation process with prototypes now working in lab models. We have a strong cadence of new solutions under development across Connected Care that BD is uniquely positioned to deliver. And I’m pleased to have Bilal Moussin, EVP and President of our Future Connected Care segment with us on the call today. Bilal joined BD in July from Massimo and is known for his deep knowledge of the sector, a strong track record of transformative innovation and his commercial focus on driving growth.

This is an exciting next step in our journey to becoming the new BD and I look forward to Bilal’s partnership. In MDS, we recently received FDA clearance for CentraVena one, our rapid insertion central catheter, and we’re on track to launch this quarter. This is BD’s first entry into the $500,000,000 central line market. And CentraVena is designed to transform the efficiency and safety of insertion and reduce the risk of serious complications. In our BD Interventional segment and advanced tissue regeneration platform, we continue to expand indications for phasics.

With the EU launch of the world’s first reservable scaffold with broad indications to prophylactically prevent incisional hernias. With more than 2,500,000 laparotomies performed annually across The U. S. And Europe. Incisional hernias affect an estimated thirty percent of patients and up to fifty percent among high risk populations.

These preventable hernias often lead to a cycle of complications, such as recurrence, surgical site infections and reoperations. The U. S. Clinical trial is ongoing with full patient enrollment anticipated in FY twenty twenty six. Lastly, our BD Excellence operating system continues to be a key enabler of our strong margin execution and is expanding our competitive advantage in manufacturing, streamlining internal processes and optimizing our supply chains in today’s tariff environment.

In Q3, customer service levels measured as on time in full deliveries or OTIF reached their highest level in over five years and continue positive momentum into Q4. Over the last two years, BD Excellence has been used to reduce manufacturing waste by more than 35% and OEE or efficiency of equipment is up significantly, creating capacity to produce an additional 2,500,000,000 units on the same production lines. We continue to be in the early innings of BD Excellence and see a long runway ahead across operations, commercial, R and D and process excellence. This also applies to our Life Science businesses, which are being separated, where BD Excellence has accelerating momentum and margin expansion initiatives are progressing well. We’ll be transitioning these capabilities to Waters to continue this progress.

In closing, we achieved our objectives in Q3 and are fully engaged in executing our commercial initiatives to ensure we accelerate organic revenue growth through market dynamics. Simultaneously, we’re focused on closing the transaction with Waters that will position BD for its next chapter of long term success. With that, I’ll turn it over to Chris.

Chris Dolorfis, Executive Vice President and Chief Financial Officer, BD: Thanks, Tom. Starting with our Q3 revenue performance. Revenues of $5,500,000,000 grew 8.5% or 3% organic. New BD organic growth was 4%. Regionally, total company organic growth was led by performance in The U.

S. And Greater Asia outside of China, partially offset by China. In BD Medical, as we expected, Pharm Systems showed sequential improvement with 4.8% growth as we anniversary the impact of customer inventory destocking and delivered another quarter of double digit growth in Biologics, driven by increased orders for GLP-1s. We continue to monitor market dynamics as volatility in subcategories such as generic anticoagulants and vaccines remain. MMS delivered solid mid single digit growth as we continue to secure competitive wins at several large health systems in the quarter across both infusion and dispensing and are tracking ahead of our goals for upgrading and securing our Alaris installed base.

MDS grew low single digits as volume growth in vascular access management and hypodermics in The U. S. Was offset by ongoing change in clinical practice following the fluid shortage and volume based procurement pressure in China as expected. APM delivered 13% pro form a growth in the quarter. This was driven by strong commercial execution, incremental selling investment made as part of our acquisition thesis and new product innovation including the recent launch of the HemoSphere Ultamonitor.

Our Interventional segment delivered nearly 7% growth in the quarter with 12% growth in UCC supported by the recent launches of PURWIC Flex at Home and PURWIC Male, which continue to outpace the new product ramp of PURWIC Female. Surgery delivered mid single digit growth driven by double digit growth in our Advanced Tissue Regeneration platform from incremental investments in our phasics sales force, our recent phasics umbilical launch and continued adoption of Galaflex for plastic and reconstructive surgery. Peripheral intervention also grew mid single digits. Our focus on commercial execution and new accounts and the creation of a dedicated women’s health sales team all contributed to improved sequential performance in the business. Lastly, in BD Life Sciences as expected, Biosciences and Diagnostic Solutions decreased low single digits with each demonstrating significant sequential positive momentum of approximately two fifty basis points in the quarter.

We expect continued positive momentum into Q4. In B2B, reagents and service, which represented about 75% of B2B revenues in Q3, grew a healthy mid single digits, excluding the impact from the planned exit of a legacy platform. This was offset by a year over year decrease in instrument sales driven by continued market dynamics in China and Europe. Sequentially, research instruments improved in The U. S.

And EMEA by approximately 4080% respectively, driven by the launch of the FaxDiscover 88 with sales well ahead of our initial plans and strong demand heading into Q4. While research funding in Europe continue to be constrained within our prior expectations, The U. S. Is showing early signs of stabilization in the academic and biopharma end markets. While year over year performance in Diagnostic Solutions reflects the decrease in our point of care business and in Back Tech due to the previous supply disruption, we are very encouraged by the sequential improvements that played out and expect the business to return to growth next quarter.

In Q3, Backtech utilization increased over 20 percentage points sequentially, exiting the quarter at over 80% of historic levels and already in line with our Q4 planning assumptions. BD MAX IVD continue to grow double digits amid favorable reimbursement dynamics playing out in the molecular diagnostic space that are a growth tailwind for this platform. As these positive trends continue to take hold and temporary growth headwinds continue to fade, the Biosciences and Diagnostic Solutions business is on a sound trajectory back to its historic mid single digit plus growth rate. Rounding out the Life Sciences segment, year over year growth in specimen management was led by the BD vacutainer portfolio, partially offset by China market dynamics. Turning to the P and L.

We continued strong execution down the P and L and as a result exceeded both our adjusted margin and earnings targets with Q3 adjusted operating income growing double digits and adjusted diluted EPS growing 5.1% to $3.68 We delivered strong adjusted gross margin of 54.8% and adjusted operating margin of 25.8%, which increased by fifty and sixty basis points year over year respectively. Gross margin expansion continued to be primarily fueled by momentum in BD excellence, driven by manufacturing productivity, waste improvement and network optimization. Further leverage in operating margin was driven by active management of shipping and G and A costs, while investing in selling and marketing to drive growth. Regarding cash and capital allocation, year to date free cash flows were approximately $1,700,000,000 which increased sequentially by $1,000,000,000 BD excellence continue to drive productivity gains, us to leverage capital expenditures. We also realized sequential cash benefits from improved collections and the timing of payables.

This was partially offset by increased inventory levels and cash payments related to tariffs. We ended the quarter with net leverage of 2.8 times and continue to make progress towards our 2.5 times net leverage target. We also see share repurchases as a value creating opportunity given our view of the intrinsic value of BD. We expect to complete our $1,000,000,000 buyback by the September, which is ahead of our original commitment. Moving to our updated fiscal twenty twenty five guidance.

Building off our Q3 performance, we reaffirmed our currency neutral revenue guidance including total revenue growth of 7.8% to 8.3% and organic revenue growth of 3% to 3.5%. While uncertainty from market headwinds continue to persist, we expect year over year organic growth to improve sequentially in Q4. This improvement is largely driven by the expected contribution from APM’s organic growth and continued momentum in Back Tech as well as a favorable comparison to the prior year in DS. Regarding foreign currency, based on current spot rates for illustrative purposes, we now expect translational FX to be immaterial or approximately a $10,000,000 increase year over year to revenue. We raised our adjusted EPS guidance by $0.18 at the midpoint to a range of $14.3 to $14.45 This reflects growth of about 9.4% at the midpoint, which is an increase of approximately 1.4% compared to our prior guidance and reflects strong Q3 performance and incremental Q4 investments in selling and marketing to accelerate our organic growth trajectory.

Based on current spot rates, we expect the FX impact to EPS to be about neutral for the full year. Our EPS guidance continues to include an estimated tariff impact of about $90,000,000 or 2% to EPS growth for the full year, which as a reminder is predominantly weighted to Q4. For the full fiscal year, given the strength of our continued gross margin expansion, including additional investments in selling and the impact from tariffs, we remain on track to deliver our goal of 25% operating margin by 2025. As you think about the full year impact of tariffs in fiscal twenty twenty six, the landscape remains fluid, but based on policies in place today, we currently anticipate a full year 2026 tariff impact of around $275,000,000 This is a notable improvement compared to initial expectations and reflects the results of our team’s ongoing active mitigation efforts and tariff rates that moderated on a net basis since our last update. In closing, we remain focused on navigating the current environment to deliver on our revenue and increased earnings commitments while positioning BD with continued momentum beyond 2025.

With that, let’s start the Q and A session. Operator, can you please assemble our queue?

Conference Operator: Thank you. Thank you. You. And our first question will come from Patrick Wood with Morgan Stanley.

: Beautiful. Thank you so much for taking the question. I’d love on the RemainCo side, the plus 4% growth. If we think about flowing into Q4 and then to your point, APM drops into being organic and we’re seeing that biologics pipe flowing through into PS and urology is strong. I know we’re not talking about ’26 yet in the kind of midterm, but is it the right framework?

Is there any reason we would be wrong to think that RemainCo should be stable in that kind of mid single digit plus kind of a range as a just a conceptual framework? Is there anything that would be wrong with that thought process when we’re looking a little bit more midterm? Thanks guys.

Tom Polin, Chairman, Chief Executive Officer and President, BD: Yes. Thank you for the question, Patrick, and good morning. We are pleased with the performance, as you mentioned, across a number of areas, whether or not in the BD Interventional business. Continued strength of UCC, which was underlying about 10 last quarter, continued that this quarter, strong performance across MMS. And as you mentioned, good to see as we expected the recovery in farm systems driven by double digit biologic growth.

And as you shared, we also continue to secure more and more contracts for biosimilars in that category in GLP-1s, which has been a key strategic focus of ours. You saw that continue to play out, as you mentioned, in areas across also the sequential improvements in the Life Science business, particularly two fifty basis points in BDB and DS. As you said, 4% growth for the new BD, which is also about where we expect to be for the full year. And so those trends that you’re seeing across BD Interventional, across the Connected Care Medical segment, we expect those largely to continue. There’s nothing different that we would expect fundamentally from those.

I think as we as you also mentioned, we saw very strong growth in APM ahead of our deal model, 12% growth sorry, 13% growth for the quarter. And that’s really driven by strong execution from that team, some great innovations hitting the market. And as part of our deal thesis to start with, and we had shared this at the time of the announcement, we were going to make incremental investments in selling in certain areas of innovation and the team has been executing those really well on those sales investments in APM and you’re starting to see that come through. You also saw us announce that we’re making some outsized continued investments more broadly in the company behind areas of opportunity in Q4, specifically in our selling organization. Think about areas like UCC, other areas in interventional and in the medical segment, connected care, on some big new product launches like the Pyxis Pro that we’re doubling down and investing behind as we go into Q4 to help set us up for FY 2026 and beyond.

So thank you, Patrick, the question.

: Thanks so much.

Conference Operator: Thank you. Our next question will come from Rick Wise with Stifel.

Rick Wise, Analyst, Stifel: Good morning to you both. Thinking about one question, I guess I’m going to focus on the just something nearer term. And maybe Chris, you can talk a little about your implied operating margin guide for the fiscal fourth quarter. My initial back of the envelope calculation suggests that just as I do the math that implies sort of a step down in operating margins relative flat or down, I should say, to the prior quarter. Just help us think through the headwinds or the mix issues that might relate to that.

Is it China? Is it conservatism? Is this tariffs? Just help us think through the sequential margin dynamics given your excellent performance and outperformance this quarter. Thank you.

Chris Dolorfis, Executive Vice President and Chief Financial Officer, BD: Yes, Rick. Thanks. Look, we’ve been really strong this year in terms of quality P and L. You see the benefit of BD excellence playing out in our margin profile consistently quarter over quarter. I’d suggest we’ve been best in class in terms of margin, EPS flow through.

If you look at our full year guide now, 9.4% at the midpoint, a significant raise in the quarter. And that’s while absorbing two points for the full year of growth from total tariffs. So as you think of what to expect in Q4 as you squeeze the balance of the year, first of all, on gross margin, it’s going to be about flat year over year. And by the way, just as a reminder, right, we have $90,000,000 of tariffs that are all flowing through in Q4, right? So that’s nearly 150 basis points.

So that shows the power of BD excellence and what we’re getting in terms of net productivity, offsetting inflation that’s fully absorbing in gross margin, the tariffs. The operating margin is as planned. There’ll be a slight sequential step down quarter to quarter, And it’s largely driven by just the timing of our investments. And as you saw in our updated guidance, we’re actually fueling the business with more investment to continue to fuel those areas of momentum that Tom mentioned. So all in all, I think when you look at the print, it’s extremely strong EPS.

It really demonstrates the power of BD to compound earnings at a compelling growth rate despite macro factors. So we’re very pleased with that.

Rick Wise, Analyst, Stifel: Thank you, Chris. Congrats again on the excellent performance this quarter.

Tom Polin, Chairman, Chief Executive Officer and President, BD: Thank you, Rick.

Conference Operator: Thank you. Our next question will come from Larry Biegelsen with Wells Fargo.

: Good morning. Thanks for taking the question. Chris, two for you. I’m going to try to ask them both together. First, usually on the Q3 call, you give some helpful commentary on the following year, particularly on the P and L.

So is there anything you can share with us today on whether you can increase the margins year over year in fiscal twenty twenty six given the tariff impact, Color on FX today or high level thoughts on EPS growth. And second, what can you say about the post separation margin outlook? You’ve talked about it, the operating margin post separation being similar to the current BDX operating margin. Does that include TSAs and MSAs? And any color you can share with us today on below the line items like tax rate?

Obviously, we’re all trying build RemainCo P and Ls here. Thanks for taking the question.

Chris Dolorfis, Executive Vice President and Chief Financial Officer, BD: Yes. Thanks, Larry. Appreciate it. Maybe with the separation first, something that we shared. There’s always a couple of ways to look questions tend to be, do you have dislocation in margin?

We shared last time publicly that there will actually be very difference in terms of operating margin pre separation and post separation. So that’s within a reasonable range, plus or minus. So you should see a healthy margin come out. Plus you’re going to continue to get the benefit of BD excellence carrying through. So you’ll continue to have those same dynamics.

So that’s very positive. There’s always stranded costs when you have these things. There will be a TSA that largely offsets that. So those two factors, coupled with the fact that with the $4,000,000,000 cash we get and at least half of that going towards share buybacks, creates another lever that will create some EPS accretion tied to that. So we actually think when you kind of separate the pieces of BD and think of the earnings that goes with the separation that you’re getting meaningful value for and then the earnings that’s left and then the TSA on top of that and then the EPS accretion from the share buybacks positions us well to not have any leakage as you think of the sum of the parts there.

And so it sets up nicely for new BD. Tom talked about the new BD growth rate, right? And so that’s where we stand with the separation. We’ll obviously provide more details. We give our November guide and help everyone try and bifurcate those pieces in more detail.

Still a bit early. As you think of 2026, look, it’s early given various macro factors, etcetera, to give full color. But a couple of things. One thing we shared on the call was our tariff outlook for 2026. We know expectations out there were set last quarter.

We said that it would be about $275,000,000 in 2026, which is a meaningful improvement from where you are. So as you think of where EPS may be sitting today based on prior expectations, that should be positive. I think the other thing I would say is, as you see us doing now, right, BD excellence, we’re in early innings there. That becomes a strong underlying favorable margin dynamic that will play out in our P and L. Obviously, you do need to contemplate the incremental impact from tariffs, the $275,000,000 less than 90,000,000 that we already have in our base.

But it’s a better outlook. Folks should see that as a better outlook versus where we were last quarter. Rough math, I think, where most people were assuming, that’s about an $85,000,000 benefit from where folks were sitting. So I think those two things are favorable things you should think about as we head into 2026.

: Thanks so much.

Conference Operator: Thank you. Our next question will come from Travis Spee with Bank of America.

Travis Spee, Analyst, Bank of America: Hey, thanks for taking the question. I guess just a bigger picture question on kind of the growth outlook for the RemainCo business, kind of the new BD, if you will. What do you how do you kind of see this business growing kind of versus the 5.5% plus longer term? And then and also how should we think about kind of capital deployment, the new strategy on capital deployment kind of post separation?

Tom Polin, Chairman, Chief Executive Officer and President, BD: Yes. Thanks, Travis. I can start off with that. And obviously, I made some earlier comments to Rick’s question earlier, similarly related. Maybe I can we’re obviously very focused on executing in 2025 and chopping wood through the balance of the year, but I could give a little bit of and it’s too early to talk details about ’26, but maybe just give a little bit of thoughts to share related to that.

So we’re obviously encouraged by the recent sales performance across the portfolio as we execute our commercial initiatives. The series of new innovations that you see that we talked about on the call, particularly most of those we actually started investing in at the start of BD twenty twenty five as part of the portfolio strategy we talked about then. Obviously, it takes a couple of years for those to come through. They’re starting to hit market. We’re excited about those launches.

And you’re seeing us take incremental, some of the flywheel benefits of the efficiencies we’re getting from BD Excellence. We’re reinvesting a portion of those behind those launches, behind our selling organization to keep driving that growth. And we’re going to continue to lean into those investments as we go into Q4 to build on that momentum. Obviously, we think going forward, too, we’re going continue to look at what is a dynamic macro environment. As we go into next year, we’re going be prudent about that.

We’re going to monitor, we’re going to study how certain market dynamics play out, continuing to focus on China, certain sub segments of pharma delivery, specifically vaccines. And obviously, life science research market will obviously give a HoldCo guide as it comes to ’26 and we’ll incorporate all of those in. As we’ve talked about as well, we see BD Excellence still in early innings and we expect to continue to benefit from that momentum and its impact on our margins. We still see more runway ahead there. And we’re going to continue chopping wood on tariffs too, right?

We’re pleased with the progress that we announced here this morning, but we’re not done. We have teams still working on that, dedicated teams across each of the businesses assigned to keep whittling that down. And there’s very specific actions that we’re taking on that. We’ve got obviously, we’ve talked about changing sourcing flows, things like vacutainer and flush, sourcing those for China out of markets other than The U. S.

We’ve talked about changing components and kits to get more U. S.-made components in certain kits to allow them to comply with USMCA and tariff exemptions. And of course, we’re working with suppliers to optimize our sourcing locations as well, too, as part of that matrix. And that’s something that we’ve got a steering team on top of all over as we continue to look to offset that further. So hopefully, that gives a little bit of color of how we’re thinking about things.

And as look ahead, we obviously look forward to giving more updates as we move in through Q4.

Travis Spee, Analyst, Bank of America: Great. Thank you. And Chris, on the Q4 EPS, I think there’s some investments there. Anything else kind of driving the change in the Q4 EPS?

Chris Dolorfis, Executive Vice President and Chief Financial Officer, BD: No. It’s just I mean largely, it’s the investment profile really, Travis. There’s nothing else there. Again, I mean it was a strong quarter, a significant raise. I mean we took the midpoint up above our prior top end of the guide, 9.5% EPS growth at the midpoint with zero FX benefit for the year, super strong.

Margins remain intact. The only dynamic you have flowing through Q4 that’s nuanced is really the tariff impact flowing through there, which is not new news. That stays intact and then want to continue to invest behind the business. Again, I think it’s best in class management of margin, EPS leverage and flow through and feel really good about that.

Travis Spee, Analyst, Bank of America: Great. Thanks a lot.

Tom Polin, Chairman, Chief Executive Officer and President, BD: Thanks Travis.

Conference Operator: Thank you. Our next question will come from Robbie Marcus with JPMorgan.

Robbie Marcus, Analyst, JPMorgan: Great. Good morning and thanks for taking the questions. Maybe on urology, it was a great print double digit percent growth. Maybe just speak to the trends there. Was there anything one time in the quarter?

And how you’re feeling about that and the interventional business moving into next year?

Tom Polin, Chairman, Chief Executive Officer and President, BD: Yes, Robbie, this is Tom. Thanks for the question. Urology is continuing. There’s nothing one time there at all. It’s a continuation of the trends.

As we had said last quarter, of course urology had a comp on a one time settlement they had in Q2. But underlying that, when you excluded the settlement, which wasn’t related to business performance, that business grew 10% last quarter. So this is really a continuation of that very strong momentum that they’ve been building as they’ve both been driving the male PureWick, which continues to scale even faster than the original female PureWick is doing fantastic. Obviously, continuing to expand PureWick into the home. We continue to advance our clinical study aimed at getting at home reimbursement.

And so the growth that we’re getting at home is all out of pocket today. We see a meaningful opportunity to unlock additional upside there through the trial that’s progressing very well, and we expect to conclude in 2026. We also have a series of new launches that will be coming up here very soon, including the first mobile PureWick. That next product that we’ll be launching in Q4 actually heading into FY twenty twenty six will be for patients who are in wheelchairs, but it will be the first wireless battery driven version of a mobile PureWick. And then we have versions coming in the future that would allow people to be completely to walk around with kind of a fanny pack type version.

So we’ve got a strong runway ahead in continued innovation in that space that we’re really excited about. I think as you think about the broader areas of the interventional business, again, the acquisition we did at the start of BD twenty twenty five with TEFA, the team is doing a really nice job iterating serially on new applications and indications with that biomaterial. So you saw Rick and the team start by getting indications in the hernia space to replace plastic mesh there. You then saw us start to you saw us get approval for the first application to prevent hernias after laparotomy surgeries, first launching in Europe right now. We’re investing behind that.

That’s one of the areas of incremental investment we’re making is investing behind that launch and market shaping. And we’ve got that clinical trial underway to bring that innovation to The U. S. I think actually the first indication of that same biomaterial for GI indications launches next year in ’twenty six. So again, we’re excited by what’s happening there.

In the surgery space, we like the innovation pipeline that we’ve built over the BD 2025 window here. And then of course, in PI, solid growth there. They’ve obviously feel the impact of VOBP in China. But in other areas, we’re excited by some new launches coming up there, particularly one in the breast biopsy space as well as some new vascular applications that we’re going to be getting into that we haven’t been in before that start to launch in 2026 that we’ve talked about in the past. So Rob, I hope that gives some color, but really driven by innovation on the UCC side.

Robbie Marcus, Analyst, JPMorgan: Great. Maybe just to follow on to the last question. Chris, it sounds like there’s increased SG and A investment in fourth quarter coming in below Street expectations on EPS. How do we think about where that is, what it’s funding? And should we carry that level of investment in SG and A into next year?

Thanks a lot.

Chris Dolorfis, Executive Vice President and Chief Financial Officer, BD: Look, think a real positive thing we’ve talked about BD excellence was not just the impact it has on margin and the opportunity to compound earnings, which we’ve done, right? Again, best in class margin and EPS flow through with almost 9.5% at the midpoint. But importantly, we want to keep investing in both innovation and commercial execution. You’ve seen us do that throughout the year. And we’re going to continue to invest behind all the Ares momentum.

Tom has mentioned them a couple of times on the call. And that’s part of our strategy. Again, we feel really good about an almost double digit EPS number at the midpoint. And this sets us up to continue some momentum as we think about 2026 driving those areas of growth. Thanks, Robert.

: Thanks a lot.

Conference Operator: Thank you. And this will conclude today’s question and answer session. At this time, I’d like to turn the floor back over to Tom Polin for any additional or closing remarks.

Tom Polin, Chairman, Chief Executive Officer and President, BD: Okay. Thank you, operator. And thanks everyone for joining today and for your support of BD. We look forward to connecting with everyone again in November.

Conference Operator: Thank you. This does conclude this audio webcast. On behalf of BD, thank you for joining today. Please disconnect your lines at this time and have a wonderful day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.