On July 8, we have updated our research report on
Baxter International Inc.
). The company depicts a stable earnings stream with positive
surprises in three of the last four quarters with an average beat
BAX, in fact, operates in the life-sustaining and critical care
products category that should remain relatively insulated from
economic downturns. Its products are not commodity-like in nature
and provide a recurring revenue stream.
The Gambro acquisition strengthened BAX's role in the hemodialysis
market. The acquisition helps the company gain an established set
of products, which strengthen its existing line of dialysis
BAX released a promising guidance, both for the second quarter and
full year 2014. For the second quarter of 2014, the company expects
revenues to grow between 12 and 13%, barring the impact of foreign
For full year 2014, BAX anticipates revenue growth in the range of
9 to 10%, excluding the impact of foreign exchange. The company
also expects adjusted earnings between $5.05 and $5.25 per share
for the year, reflecting year-over-year growth of 7.4 to 11.7%.
However, BAX depends on the EU market for about a third of its
revenues. This is a cause for concern given recent fiscal
tightening, a gloomy outlook for hospital spending and tightening
Further, BAX faces pricing pressure due to the advent of group
purchasing organizations (GPOs) in the U.S. The current economic
climate has bolstered the bargaining power of GPOs, which might put
pressure on the company's top line.
Currently, BAX retains a Zacks Rank #3 (Hold). Some better-ranked
stocks in the medical products industry are
OraSure Technologies, Inc.
Wright Medical Group Inc.
Symmetry Medical, Inc.
OraSure Technologies and Wright Medical Group retain a Zacks Rank
#1 (Strong Buy), while Symmetry Medical carries a Zacks Rank #2
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