Baxter International Inc.
) reported fourth quarter and 2012 adjusted (excluding one-time
items) earnings per share of $1.26 and $4.53, respectively,
thereby meeting the corresponding Zacks Consensus Estimates of
$1.26 and $4.53, and surpassing the year-ago earnings of $1.17
and $4.31, respectively. The fourth quarter result was in
accordance with the company's earlier stated guidance in the
range of $1.24 to $1.27 per share.
Reported profit in the quarter increased 6.7% year over year
to $494 million (or 89 cents per share). Baxter's results in the
reported quarter includes unusual after-tax amount of $206
million (or 37 cents per share) pertaining to business
restructuring and settlement of pension liabilities.
Revenues for the quarter were $3,753 million, up 4% (up 5% in
constant currency) year over year, beating the Zacks Consensus
Estimate of $3,714 million. For 2012, sales rose 2% (up 5% in
constant currency) to $14,190 million, exceeding the Zacks
Consensus Estimate of $14,154 million.
On a geographic basis, U.S.-based revenues in the quarter
improved 7% year over year to $1,572 million while international
revenues rose 2% year over year (up 4% in constant currency) to
On a segment-wise basis, Bioscience revenues stood at $1,687
million, up 7% year over year (up 9% in constant currency).
Growth was led by demand for certain product lines in the
domestic market. Revenues were primarily driven by higher
domestic demand for Advate, Gammagard Liquid and certain
specialty plasma-based therapeutics. The acquisition of Synovis
Life Technologies contributed to segment
Recombinants, the largest sub-segment, accounted for $581
million. Recombinants clambered 1% in reported terms (up 3% in
constant currency) year-over-year. The Plasma Proteins revenues
of $447 million was up 13% (up 13% in constant currency) year
over year. Revenues from Antibody Therapy increased 5% year over
year (up 5% in constant currency) to $425 million.
Revenues from Medical Products rose 2% year over year (up 3%
in constant currency) at $2,066 million. Growth was driven by
intravenous therapies, peritoneal dialysis and the takeover of
Three important sub-segments are - Renal with sales of $675
million, up 2% in constant currency; IV Therapies with revenues
of $500 million, up 8% in constant currency; and Global
Injectables with sales of $522 million, up 8% in constant
Fourth quarter adjusted gross margin was 52.4% (up 60 basis
points) compared with 51.8% in the prior-year quarter. Marketing
and administrative expense (as a percentage of sales) rose to
21.6% (up 80 basis points) from 20.8% in the year-ago quarter
while research and development expense dropped marginally to 7%
(down 10 basis points) from 7.1% in the prior-year quarter.
Baxter ended the fourth quarter with net debt of $2,660
million, up 16.2% year over year. Cash flow from operations rose
roughly 5.9% year over year to $945 million.
Outlook and Recommendation
For the first quarter of 2013, the company expects growth in
revenues in the range of 2% to 3% and adjusted earnings per share
in the band of $1.03 and $1.05.
Baxter's forecast for 2013 includes impact of its Gambro
acquisition. For 2013, Baxter guided to reported sales growth of
10% in constant currency. The company altered its expected
adjusted earnings per share to the range of $4.60 to $4.70
(earlier $4.51 to $4.54) for 2013. Baxter expects 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) rating.
) are two Zacks Rank #2 (Buy) stocks which are expected to do
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