BDX - Becton upgraded; Baxter downgraded as BofA shuffles MedTech ratings

Despite a challenging outlook for 2023, the setup for MedTech stocks looks favorable after three difficult years, argued Bank of America as the firm upgraded Becton, Dickinson ( NYSE: BDX ) and downgraded Baxter International ( NYSE: BAX ) on Tuesday.

Citing macro concerns, the analysts led by Travis Steed argued that “a recession and moderating inflation is an environment where medtech estimates can hold up relatively better.”

Despite weakening demand in other industries, the firm expects more durable revenue in the MedTech space and thinks softening inflation will expand MedTech margins again in late 2023/24.

However, citing replacement Capex as a risk to Baxter ( BAX ) and Stryker ( NYSE: SYK ), BofA downgrades the former to Neutral from Buy and reaffirms the Neutral rating on the latter.

While trimming the price target on Baxter ( BAX ) to $55 from $66 per share, the analysts argue that the company’s levered balance sheet lacks flexibility and a high proportion of its free cash flow is spent on dividends.

However, BofA upgrades Becton ( BDX ) to Buy from Neutral and raises its price target to $290 from $250 per share, arguing that the company “has a path for multi-year double digit EPS growth.”

Citing the company’s legal team, the analysts also rule out litigation risk related to emissions of carcinogen ethylene oxide (EO) where Becton ( BDX ), alongside rivals Sotera Health ( STE ) and STERIS ( STE ), battles multiple lawsuits.

Read: Seeking Alpha contributor Wolf Report wrote on Monday that Baxter ( BAX ) is “not the highest yielder, but the upside to the business is potentially massive.”

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