We reiterate our Neutral rating on
). Its earnings per share of $1.01 beat the Zacks Consensus
Estimate of 99 cents and sailed past the year-ago earnings of 98
cents per share. The first quarter results beat Baxter's earlier
earnings guidance of 98 cents to $1.00 per share.
Sales for the quarter were $3,388 million, up 3% year over year,
surpassing the Zacks Consensus Estimate of $3,302 million. On a
segment-wise basis, Bioscience sales were $1,462 million, up 4% (up
5% in constant currency) year over year. Revenues from Medical
Products were up 3% year over year (up 3% in constant currency), to
For the second quarter of fiscal 2012, the company expects
growth in revenues in the range of 3% to 4% in constant currency
and adjusted earnings per share in the band of $1.10 and
$1.12. For the full year 2012, Baxter continues to forecast
constant currency sales growth of about 4% to 5% and adjusted
earnings per share in the range of $4.49 to $4.57 (earlier $4.47 to
The news regarding Baxter still remains mixed. On the positive
side, Baxter's focus on life-sustaining products, which are not
commoditized, partly insulates 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.
Baxter, in November 2011, completed its acquisition of Baxa
Corporation. The takeover highlights the company's continued
commitment toward patient safety and nutrition. It also permits
Baxter to provide a wider set of solutions for the safe preparation
and delivery of IV medication. Baxa's know-how will benefit
patients across the globe.
Moreover, Baxter struck a deal, in December 2011, to buy Synovis
Life Technologies, a well-known provider of mechanical and
biological products for the repair of soft tissue utilized in a
large number of surgical operations. The acquisition will further
expand Baxter's offerings in the area of biosurgery and
On the flip side, despite resilience in Plasma Proteins and
Antibody Therapy sub-segments, we are concerned about slow growth
in sales, a slightly somber outlook for hospital spending and
tightening of reimbursement. We also account for the unfavorable
impact of foreign exchange translation and possible dilution
associated with the company's acquisitions of Baxa and Synovis.
Improved execution has lifted sentiment somewhat toward Baxter.
It is a good bet for value investors willing to wait as
fundamentals improve further. The lingering bearishness surrounding
the stock can be lifted by consistent execution. In the meantime,
the company continues to deploy robust cash flow for stock
repurchase and dividend. Among others, the company competes with
Becton, Dickinson and Company
) in certain niches. We currently have a Neutral long-term rating
on Baxter. The stock presently retains a Zacks #3 Rank, which
translates into a short-term "Hold" recommendation.
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