Topic: Growth Stocks

C.R. Bard Inc. $87 – New York symbol BCR

C.R. BARD INC. $87 (New York symbol BCR; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 99.3 million; Market cap: $9.1 billion; WSSF Rating: Above average) makes medical devices in four main areas: Vascular products such as stents and catheters (25% of 2007 sales); Urology products such as drainage and incontinence devices (30%); Oncology products that inject medications into cancer patients (25%); and Surgical Tools and other products (20%).

In the three months ended March 31, 2008, Bard’s earnings grew 7.4%, to $109.1 million from $101.6 million a year earlier. Per-share earnings rose 11.6%, to $1.06 from $0.95, on fewer shares outstanding. Revenue rose 10.6%, to $584.0 million from $528.2 million. Bard sells about a third of its products overseas. If you exclude the positive effect of the lower U.S. dollar, sales would have grown 8%.

The company recently decided to stop making its Salute II hernia repair device, due to manufacturing problems. Bard would rather focus on developing new hernia products, instead of re-engineering the Salute II. Consequently, Bard will write down inventory and other assets related to the Salute II. This will cut its pre-tax earnings in the second quarter of 2008 by $40 million to $45 million.

Bard should earn $4.40 a share in 2008, and the stock trades at 19.8 times that figure. That’s reasonable considering it spends 6% of its revenue of $21.50 a share on research. The company recently increased its quarterly dividend 6.7%, from $0.15 a share to $0.16. The new annual rate of $0.64 yields 0.7%.

C.R. Bard is a buy.

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