Earnings Preview: Baxter - Analyst Blog
April 17 2012 - 10:00AM
Zacks
Baxter
International (BAX) is slated to report its first-quarter
2012 results on Thursday, April 19. The current Zacks Consensus
Estimate for the quarter is $0.99, representing an estimated 1.38%
annualized increase.
Fourth Quarter
Recap
Baxter reported fourth quarter
adjusted (excluding one-time items) earnings per share of $1.17,
just beating the Zacks Consensus Estimate of $1.16, and surpassing
the year-ago earnings of $1.11. Reported net income increased to
$463 million (or 82 per share) from $423 million (or 72 a share) a
year ago.
Total revenues were $3,594 million,
up 3% year over year, beating the Zacks Consensus Estimate of
$3,578 million. U.S. revenues for the quarter inched up 2% to
$1,466 million while ex-U.S. sales were higher 3% (up 3% in
constant currency) to $2,128 million.
The Plasma Proteins business, where
Baxter had encountered structural problems in the past, did not do
so well with revenues of $397 million, down 4% (down 2% in constant
currency) year over year. Antibody Therapy delivered good results
with sales of $406 million, climbing 5% (up 6% in constant
currency) year over year.
Estimate Revision
Trend
Agreement
The overall trend in estimate
revisions for Baxter demonstrated little activity in the recent
past. Of the 14 analysts covering the stock, only 1 changed his/her
estimate (in the upward direction), for the current quarter, over
the prior week and past month. The same pattern was repeated (by 17
analysts covering the stock), for the current year. The current
Zacks Consensus Estimate for 2012 is $4.54, reflecting an estimated
5.23% year-over-year increase.
Magnitude
Given the general shortage of
estimate revisions, the magnitude of revisions, for the forthcoming
quarter, has hit a plateau over the last week and month. The
estimate for fiscal 2012 has moved up by only a penny over the
prior week and month.
Baxter has produced positive
surprises in three of the previous four quarters and we expect a
similar trend to continue. The company produced an average earnings
surprise of 3.74% over the prior four quarters, meaning that it
beat the Zacks Consensus Estimate by that measure.
Our Take
The news regarding Baxter still
remains mixed. On the positive side, Baxter’s focus on
life-sustaining products, which are not commoditized, partly
insulates it from an economic downturn. The company is able to
generate recurring revenues, and consistent cash flow, due to its
focus on chronic diseases. Among other positive factors, Baxter
retains a strong product pipeline with several products in
late-stage clinical development.
Baxter, in November 2011, completed
its acquisition of Baxa Corporation. The takeover highlights the
company’s continued commitment toward patient safety and nutrition.
It also permits Baxter to provide a wider set of solutions for the
safe preparation and delivery of IV medication. Baxa’s know-how
will benefit patients across the globe.
Moreover, Baxter struck a deal, in
December 2011, to buy Synovis Life Technologies
(SYNO), a well-known provider of mechanical and biological products
for the repair of soft tissue utilized in a large number of
surgical operations. The acquisition will further expand Baxter’s
offerings in the area of biosurgery and regenerative
treatment.
On the flip side, despite
resilience in Plasma Proteins and Antibody Therapy sub-segments, we
are concerned about stagnation in sales, a slightly somber outlook
for hospital spending and tightening of reimbursement. We also
account for the unfavorable impact of foreign exchange translation
and possible dilution associated with the company’s acquisitions of
Baxa and Synovis.
Improved execution has lifted
sentiment somewhat toward Baxter. It is a good bet for value
investors willing to wait as fundamentals improve further. Among
others, the company competes with Becton, Dickinson and
Company (BDX) in certain niches. We currently have a
Neutral long-term rating on Baxter. The stock currently retains a
Zacks #2 Rank, which translates into a short-term “Buy”
recommendation.
BAXTER INTL (BAX): Free Stock Analysis Report
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