C.R. BARD INC. (New York symbol BCR; www.crbard.com) makes vascular products, such as stents and catheters (29% of its 2012 sales); oncology products that detect and treat various types of cancer (27%); urology products, such as drainage and incontinence devices (26%); and surgical tools and other products (18%).
The company mainly makes single-use, disposable products, so customers must continually buy new ones. This continued demand for supplies helped Bard’s sales rise 20.6%, from $2.5 billion in 2008 to $3.0 billion in 2012. Earnings improved by 24.1%, from $455.4 million in 2008 to $565.3 million in 2012. The company is an aggressive buyer of its own stock. This cuts its total shares outstanding, so per-share earnings jumped 48.0%, from $4.44 to $6.57.
The shares have gained 40% since the start of 2013. That’s partly in response to the company’s new long-term growth plan, which mainly involves buying firms in faster-growing niche fields.
For example, Bard recently paid $203.7 million for privately held Medafor, which makes hemostats for controlling bleeding during surgery. It is also paying $262 million for Rochester Medical (Nasdaq symbol ROCM), which makes disposable medical catheters and incontinence products for patients with urinary and bladder conditions. Bard expects to complete this purchase by the end of 2013.
Investing in stocks: Bard to develop new products as well as adding through acquisitions
In addition to buying other companies, Bard is selling some of its slower-growing operations, particularly those that face much larger competitors. In November 2013, it sold its electrophysiology business to Boston Scientific (New York symbol BSX) for $275 million. This division makes products that diagnose and treat heart rhythm disorders.
The company also aims to spur its growth by developing more of its own products. It now plans to spend over 8.0% of its sales on research, up from 6.9% in 2012. As well, Bard aims to increase its sales in fast-growing markets like Asia and Latin America. That would cut its reliance on the U.S., which accounts for two-thirds of its revenue.
Bard’s balance sheet will support these investments. As of September 30, 2013, its long-term debt of $1.4 billion was 13% of its market cap. It also held cash of $781.7 million, or $10.04 a share. The $0.84 dividend yields 0.6%.
In the latest edition of Wall Street Stock Forecaster, we examine the risks and potential rewards of Bard’s aggressive acquisition strategy. We also consider Bard’s earnings forecast over the next year and look at whether the stock can continue to rise. We conclude with our clear buy-hold-sell advice on the stock.
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C.R. Bard has had a strong run with its shares, while its dividend yield is low. Are you willing to sacrifice dividend yield for capital gains if a stock appears to be on a growth spurt? Do you have an example of a stock that did very well for you over a period of years and had a meagre dividend yield, or no dividend at all?
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