We reiterate our Neutral recommendation on
Baxter International
(
BAX
). The company reported third quarter adjusted (excluding
one-time items) earnings per share of $1.14, in line with the
Zacks Consensus Estimate and surpassing the year-ago earnings of
$1.09 per share.
Reported profit in the quarter inched up 1% year over year to
$583 million (or $1.06 per share). Baxter's results in the
reported quarter includes a post-tax research and development
charge of about $45 million (or 8 cents per share) related to
Oncova Therapeutics licensing agreement in Europe.
Revenues were flat on a year-over-year basis (up 5% in constant
currency) at $3,477 million. Baxter's third quarter revenues were
below the Zacks Consensus Estimate of $3,516 million.
On a geographic basis, U.S.-based revenues in the quarter
improved 8% year over year to $1,513 million while international
revenues declined 5% year over year (up 2% in constant currency)
to $1,964 million.
On a segment-wise basis, Bioscience revenues stood at $1,522
million, flat year-over-year (up 5% in constant currency).
Revenues from Medical Products remained flat year over year (up
4% in constant currency) at $1,955 million.
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
reimbursement.
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 carries a Zacks #4 Rank, which translates into a
short-term Sell rating.
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