Baxter International Inc.
) reported first quarter adjusted (excluding one-time items)
earnings per share of $1.05, thereby beating the Zacks Consensus
Estimate of $1.04 and surpassing the year-ago earnings of $1.01.
The first quarter result was in accordance with the company's
earlier stated guidance.
Reported profit in the quarter decreased 6% year over year to
$552 million (or $1.00 per share). Baxter's results in the
reported quarter includes unusual after-tax amount of $29 million
(or 5 cents per share) pertaining to its intended takeover of
Revenues for the quarter were $3,448 million, up 2% (up 2% in
constant currency) year over year, missing the Zacks Consensus
Estimate of $3,489 million.
On a geographic basis, U.S.-based revenues in the quarter
improved 1% year over year to $1,482 million while international
revenues rose 2% year over year (up 2% in constant currency) to
On a business-wise basis, Bioscience revenues stood at $1,530
million, up 5% year over year (up 5% in constant currency).
Revenues were primarily driven by higher demand for Advate used
in hemophilia and certain specialty plasma-based
Hemophilia, the largest sub-unit, accounted for $765 million.
Hemophilia clambered 3% in reported terms (up 3% in constant
currency) year-over-year. The BioTherapeutics revenues of $509
million was up 2% (up 2% in constant currency) year over year.
Revenues from BioSurgery increased 12% year over year (up 11% in
constant currency) to $172 million. Vaccines amounted to $84
million, up 25% (up 28% in constant currency).
Revenues from Medical Products remained flat year over year
(down 1% in constant currency) at $1,918 million.
Four sub-units are - Fluid Systems with sales of $740 million,
up 2% in constant currency; Renal with sales of $590 million, up
1% in constant currency; Specialty Pharmaceuticals with revenues
of $363 million, down 2% in constant currency; and BioPharma
Solutions with sales of $225 million, down 11% in constant
First quarter adjusted gross margin was 51% (up 20 basis
points) compared with 50.8% in the prior-year quarter. Marketing
and administrative expense (as a percentage of sales) rose to
22.6% (up 70 basis points) from 21.9% in the year-ago quarter
while research and development expense rose marginally to 7.1%
(up 10 basis points) from 7% in the prior-year quarter.
Baxter ended the first quarter with net debt of $3,178
million, up 8.2% year over year. Cash flow from operations
dropped roughly 13.5% year over year to $386 million.
Outlook and Recommendation
For the second quarter of 2013, the company expects growth in
revenues of 3% in constant currency and adjusted earnings per
share in the band of $1.12 and $1.14.
Baxter's forecast for 2013 includes impact of its Gambro
acquisition. For 2013, Baxter continues to guide to reported
sales growth of 10% in constant currency. The company also
continues to expect adjusted earnings per share in the range of
$4.60 to $4.70 for 2013. The guidance for earnings per share
takes into account that Gambro will dilute earnings by 10 cents
to 15 cents in 2013. Baxter continues to expect cash flow
from operations to approximate $3,300 million for 2013.
The news regarding Baxter still remains somewhat mixed. On the
positive side, Baxter's focus on life-sustaining products which
are not commoditized, partly insulate 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.
On the flip side, despite resilience in certain sub-segments,
we are concerned about relative stagnation in sales, a slightly
somber outlook for hospital spending and tightening of
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
Becton, Dickinson and Company
) in certain niches.
The stock carries a Zacks Rank #3 (Hold).
Align Technology Inc.
The Cooper Companies Inc.
) carry Zacks Rank #2 (Buy) and are expected to do well.
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