On Mar 26, Zacks Investment Research downgraded
Baxter International Inc.
) to a Zacks Rank #3 (Hold).
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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
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
Other Stocks to Consider
In the Medical Products space,
Meridian Bioscience, Inc.
) are performing well. While Enzymotec carries a Zacks Rank #1
(Strong Buy), SurModics and Meridian hold a Zacks Rank #2