Friday, December 16, 2005

C R Bard announces $500 million Stock Repurchase Program

Yesterday, BCR had an analyst meeting where it forecast earnings growth of a minimum of 14% for next year as well as reviewed its product pipeline. Bard, which I suspect suffers from a false perception as a relatively boring and staid company, has actually demonstrated significant growth in the last five years. Earnings per share have grown at about a 20% rate and return on invested capital has improved steadily to20% versus about 11% in 2000.

The company highlighted its significant leadership positions in its four segments. In its oncology division, 95% of its revenues come from products where BCR is #1 or #2. For surgery, such products represent 93% of revenues, for urology 88%. Only in the vascular area is BCR a me-too with 56% of revenues coming from #1 or #2 products.

At first glance, the $500 million buyback appears significant relative to BCR's five year history of buying back "only" $295 million in stock. However, the company also issed some $220 million in stock as well, resulting in a net buyback of a mere $75 million. Recent history suggests that BCR is "getting it" with YTD net repurchases of $40 million.

The company indicated at yesterday's meeting that it would be buying back 5% of its stock in the next five years, not exactly a fast pace. However, when we look at the fully diluted sharecount in BCR over the last five years, shares outstanding has actually grown from 102.4 million to the current 108.3 million.

The company has some $500 million in cash on its balance sheet, an 'A' rating on its debt, and plenty of flexibility to make acquisitions.

In my view, this is an undervalued high quality stock.


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