CHICAGO, April 25, 2011 /PRNewswire/ -- Zacks.com
announces the list of stocks featured in the Analyst Blog. Every
day the Zacks Equity Research analysts discuss the latest news and
events impacting stocks and the financial markets. Stocks recently
featured in the blog include: Baxter International Inc.
(NYSE: BAX), Becton, Dickinson and Company (NYSE: BDX),
Biotherapeutics Holdings Corp. (Nasdaq: TLCR), Western
Digital Corporation (NYSE: WDC) and Hitachi Global
Storage Technologies (NYSE: HIT).
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Here are highlights from Thursday's Analyst Blog:
Baxter Beats Fair and Square
Baxter International Inc. (NYSE: BAX) reported
first-quarter 2011 adjusted (excluding one-time items) earnings per
share of 98 cents, beating the
corresponding Zacks Consensus Estimate of 93
cents, and surpassing the year-ago results also of
93 cents. The results exceeded
Baxter's earlier guidance of 92 cents to 94
cents.
Baxter reported profit of $570
million (or 98 cents a share)
in the quarter versus a loss of $63
million (or 11 cents a share)
a year ago. Its first quarter results in 2010 included after-tax
special items aggregating $627
million (or $1.04 per share)
arising from the Colleague infusion pump and a change in certain
tax treatment.
The forecast-topping results, coupled with the company's upward
revisions to guidance, pushed up its shares $1.48 (2.71%) to $56 in early trading on April 21.
Revenues
Total revenues were $3,284 million
in the first quarter, up 12% year over year, beating the Zacks
Consensus Estimate of $3,178 million.
Revenues in the prior year included an adjustment of $213 million for the Colleague infusion pump.
Excluding this adjustment, worldwide sales grew 5% year over year.
Domestic revenues for the quarter jumped 10% to $1,422 million while overseas sales were higher
1% to $1,862 million.
Segment-wise Revenue Analysis
With regard to segment performance, Bioscience revenues totaled
$1,408 million, up 3% (up 4% in
constant currency) year over year. The better performance was
attributable to higher demand for Gammagard Liquid, several
specialty plasma-based therapeutics and biosurgery products.
The largest sub-segment, Recombinants, had sales of $512 million, flat in reported terms (up 1% in
constant currency) year over year. The Plasma Proteins business,
where Baxter had encountered structural problems in the past,
performed well with revenues of $308
million, up 5% (up 8% in constant currency) year over year.
Antibody Therapy performed sharply better with sales of
$374 million, climbing 16% (up 18% in
constant currency) year over year.
Revenues from Medication Delivery went up steeply by 20% year
over year (up 19% in constant currency), to $1,868 million, riding on growth in intravenous
and nutritional therapies as well as a broad range of generic and
pre-mixed injectable drugs. This segment now includes Renal
products.
The three prominent sub-segments were Renal with revenues of
$587 million, down 1% in constant
currency; IV Therapies with sales of $428
million, up 10% in constant currency basis; and Global
Injectables with revenues of $517
million, up 14% in constant currency.
Margins
Gross margin was 51% in the first quarter, down from 51.9% in
the year-ago quarter. Marketing and administrative expense,
expressed as a percentage of sales, was flat at 21.8% while
research and development expense dropped to 6.5% from 7.2% in the
year-ago quarter.
Balance Sheet
Cash and cash equivalents totaled $2,168
million, as of March 31, 2011,
down 18.9% year over year. Net debt totaled $2,206 million, up 6.1% year over year.
Outlook and Recommendation
Baxter issued its guidance for second-quarter fiscal 2011 and
raised its estimates for 2011. For the second quarter, the company
expects growth in revenues in the range of 4% to 5% in constant
currency, and adjusted earnings per share in the range of
$1.01 to $1.03.
Baxter anticipates growth in revenues in the range of 3% to 4%
(earlier 2% to 3%), in constant currency, and adjusted earnings per
share of about $4.20 to $4.28
(earlier $4.15 to $4.25) for fiscal
2011. The current Zacks Consensus Estimates are $1.01 and $4.20 per
share for the second quarter and fiscal 2011,
respectively.
The news regarding Baxter remains mixed. Its pipeline remains
strong. 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.
On the flip side, despite recent improvement in Plasma Proteins
and Antibody Therapy sub-segments, we are concerned about
stagnation in sales, a still somber outlook for some hospital
spending and tightening of reimbursement.
The lingering bearishness surrounding the stock can be lifted by
consistent execution. Baxter is a good bet for value investors
willing to wait as fundamentals improve. Among others, it competes
with Becton, Dickinson and Company (NYSE: BDX) and
Talecris Biotherapeutics Holdings Corp. (Nasdaq: TLCR) 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.
WDC Exceeds, EPS Tumbles
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Western
Digital Corporation
(NYSE: WDC) reported
third quarter fiscal 2011 earnings per share (EPS) of 66 cents,
which exceeded the Zacks Consensus Estimate of 65 cents. Revenues
of $2.25 billion also bettered the Zacks Consensus Estimate of
$2.24 billion.
Revenues
Third quarter fiscal 2011
revenue of $2.25 billion declined 14.8% year over year and 9.0%
sequentially. The downfall was due to a $6.0 year over year and
$2.0 sequential decline in average hard drive selling price, to $45
per unit. Moreover, total Hard Disc Drive (HDD) units shipped
during the third quarter were 50.0 million, down from 51.0 million
in the year-ago period.
Revenue from sales of the
company's flagship products, including WD TV and WD LiveWire
products was down 6.0% from the year-ago quarter and 19.0% from the
prior quarter.
In the airline enterprise
market, the company sold 5.6 million units, up from 5.2 million
units sold in the year-ago period and 5.4 million units in the
previous quarter. This increase can be attributed to the expansion
of cloud computing, which is expected to see further upside. The
traditional enterprise market increased to 8.3 million units from
7.4 million units in the year-ago quarter, but remained flat on a
sequential basis. This reflected continued strength in the
commercial market.
Operating
Results
The company's third
quarter gross margin was 18.2%, down from 25.2% in the prior-year
quarter, and 19.2% in the prior quarter. The company reported a 100
basis point sequential decline in gross margin resulting from a
seasonal decline in its branded products business and some costs
associated with the under utilization of its manufacturing
assets.
Consolidated research and
development (R&D) as well as selling, general and
administrative (SG&A) spending stood at $252.0 million, or
11.2% of revenues in the third quarter. This compares with $224.0
million or 8.5% of revenues during the year-ago quarter. As a
result, operating income came in at $158.0 million or 7.0% of
revenues in the third quarter compared to $319.0 million or 16.7%
of revenues in the year-ago quarter.
Net income decreased to
$146.0 million, or 62 cents per share, compared to $400.0 million,
or $1.71 in the year-ago quarter and $265.0 million, or $1.13 in
the previous quarter. Excluding the impact of stock-based
compensation, the adjusted net income for the quarter was $156.0
million or 66 cents per share, compared to $400.0 million or $1.71
per share in the year-ago quarter.
Cash
Position
The company generated
$390.0 million of cash from operations in the quarter, down from
$505.0 million in the previous quarter. Cash and cash equivalents
were $3.20 billion, down from $3.08 billion reported in the
previous quarter. Capital expenditures were $175.0 million, while
depreciation and amortization totaled $151.0 million. The company
made $25.0 million of debt repayment during the third quarter,
thereby reducing the debt balance to $325.0 million.
Guidance
For the fourth quarter of
fiscal 2011, the company expects revenues in the range of $2.20
billion to $2.25 billion, total R&D and SG&A expense of
approximately $245.0 million, a tax rate between 6.0% and 9.0%, and
non-GAAP EPS of 60 to 65 cents.
Our
Take
Western Digital's third
quarter 2011 results exceeded our expectations although sales and
net profit declined on a year-over-year basis. The company is
trying to lower its interest expense by reducing its debt burden.
Although Western Digital is cash rich, its cash generation ability
suffered because of the difficult pricing environment.
Moreover, the company
recently disclosed its intention to acquire Hitachi
Global Storage Technologies (NYSE: HIT), which
should strengthen its grip on the data storage business. However,
while we are encouraged by the company's recent performance,
intense competition in the hard disk manufacturing space and within
its distribution channel remains a concern.
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