We reiterate our Neutral recommendation on
Baxter International
(
BAX
). Earnings per share of $1.12 for the second quarter beat the
Zacks Consensus Estimate by a penny. Reported profit was $661
million (or $1.19 per share), up about 7% year over year.
Baxter's results in the reported quarter include a net post-tax
special benefit of about $42 million (or $0.07 per share) related
to business developmental activities.
Revenues edged up 1% year over year (up 4% in constant currency)
to $3,572 million, sailing past the Zacks Consensus Estimate of
$3,538 million.
On a geographic basis, U.S.-based revenues in the quarter
increased 6% to $1,503 million while international revenues
decreased 2% year over year (up 3% in constant currency) to $2,069
million.
In November 2011, Baxter 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 in a large number
of surgical operations.
The acquisition will further expand Baxter's offerings in the
area of biosurgery and regenerative treatment. The takeover of
Synovis was completed in the first quarter of 2012.
Despite resilience in Plasma Proteins and Antibody Therapy
sub-segments, we are concerned about 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. Among others, the company competes
with
Becton, Dickinson and Company
(
BDX
) in certain niches. The stock currently retains a Zacks #3 Rank,
which translates into a short-term Hold recommendation.
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