2nd UPDATE: Baxter Targets Long-Term Double-Digit EPS Growth
September 16 2009 - 2:13PM
Dow Jones News
Baxter International Inc. (BAX) issued long-range financial
goals on Wednesday that continue to target double-digit earnings
growth over the next five years while the company ramps up spending
in research and development.
The maker of medical products targeting serious conditions such
as hemophilia and kidney failure is holding an all-day investor
conference in Chicago on Wednesday to review its financial goals
and research efforts. In a release ahead of the meeting, Baxter
said it expects to boost sales by about 7% to 8% over the next five
years, excluding the impact of foreign currency, while boosting
earnings per share by about 11% to 13%.
Baxter officials described this as a "base-case" forecast that
the company could exceed if certain key "wild card" development
efforts that aren't factored into guidance - such as development of
a treatment for Alzheimer's disease - bloom.
"Obviously our aspiration is to grow sales at a faster rate than
our base-case plan," Robert M. Davis, Baxter's chief financial
officer, said during the conference.
Shares of the Deerfield, Ill., company recently traded down 0.7%
to $55.57.
The new sales and earnings targets are similar to those
announced in early 2007, and Credit Suisse analyst Kristen Stewart
said ahead of the conference that earnings growth at the rate
Baxter again cited "seems like a reasonable target."
In March 2007, Baxter said that through 2011, it expected annual
sales of at least 6% to 8% and per-share earnings growth of at
least 11% to 13%.
The company's latest long-range forecasts also call for
generating annual cash flow of about $4 billion by 2014 and
increasing investment in research and development by at least an 8%
to 10% compound annual rate.
"We believe we have a balanced outlook and are well-positioned
to achieve our results while making appropriate investments to
enhance future growth and delivering value to shareholders," Robert
L. Parkinson Jr., the company's chairman and chief executive, said
in the release.
Among Baxter's business units, the company expects over its
long-term plan to grow annual sales in Bioscience - which includes
products for treating hemophilia and immune-system disorders - by
7% to 9%.
The company sees sales growth in its medication-delivery
business, which includes drug infusion pumps and intravenous access
systems used in hospitals, of 7% to 8%. The renal business, which
includes products to manage advanced kidney failure, is seen
growing by 6% to 8%.
Regarding Baxter's investment in research, some of this will
take a long time to pay off. But Parkinson noted the progress
Baxter has already made, with 14 late-stage clinical trials
currently underway.
During his presentation, Parkinson said Baxter is less
vulnerable than many medical companies to potential changes in U.S.
health-care policy, although he noted there is ambiguity about how
this process will evolve. He also noted that the company remains
well insulated against economic turmoil by the "medically necessary
nature of our products."
Regarding potential acquisitions, Parkinson said Baxter
continues to focus on smaller-scale "bolt-on" deals. He said the
pace of deal-making is likely to pick up but that "the notion of a
big megadeal" isn't in Baxter's plans.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com