Baxter Downgraded to Hold - Analyst Blog

By Zacks Equity Research,

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On Mar 26, Zacks Investment Research downgraded Baxter International Inc. ( BAX ) to a Zacks Rank #3 (Hold).

Why the Downgrade?

Baxter reported its fourth-quarter 2013 results on Jan 23. Reported earnings per share  of this Illinois-based manufacturer and distributor of health-care products decreased 33.7% year over year to 59 cents. However, adjusted earnings per share of $1.26 beat the Zacks Consensus Estimate by a penny.

On the basis of product categories, revenues from BioScience segment's vaccine declined 6% in the fourth quarter. This decline is attributable to lower milestone payments related to Baxter's ongoing collaborations on the development of Influenza vaccines, although demand for core vaccines was strong.

Baxter's operating margin dropped 280 basis points (bps) year over year to 21% in  the quarter. The company's leverage in the base business was offset by the integration of the lower margin Gambro business including headwinds like foreign currency, pension and austerity measures. This was the primary reason for the fall in operating margin.

In addition, the realization of additional costs associated with modifications and the ramp-up of production at Baxter's Los Angeles fractionation facilities adversely affected the company's gross margin. In 2013, Baxter's gross margin decreased 170 bps to 49.8%, although factors like improved product mix and price improvements had favorable effects on margin. Management expects Baxter's gross margin to decline by around 150 basis points in 2014.

The Zacks Consensus Estimate for earnings for 2014 remained flat at $5.13 per share over the last 60 days. However, for 2015, the Zacks Consensus Estimate dropped  0.9% to $5.46 over the same period.

Other Stocks to Consider

In the Medical Products space, Enzymotec Ltd ( ENZY ), SurModics, Inc. ( SRDX ) and Meridian Bioscience, Inc. ( VIVO ) are performing well. While Enzymotec carries a Zacks Rank #1 (Strong Buy), SurModics and Meridian hold a Zacks Rank #2 (Buy).

BAXTER INTL (BAX): Free Stock Analysis Report

ENZYMOTEC LTD (ENZY): Free Stock Analysis Report

SURMODICS (SRDX): Free Stock Analysis Report

MERIDIAN BIOSCI (VIVO): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: BAX , ENZY , SRDX , VIVO

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