) is slated to report its first-quarter 2012 results on Thursday,
April 19. The current Zacks Consensus Estimate for the quarter is
$0.99, representing an estimated 1.38% annualized increase.
Fourth Quarter Recap
Baxter reported fourth quarter adjusted (excluding one-time
items) earnings per share of $1.17, just beating the Zacks
Consensus Estimate of $1.16, and surpassing the year-ago earnings
of $1.11. Reported net income increased to $463 million (or 82 per
share) from $423 million (or 72 a share) a year ago.
Total revenues were $3,594 million, up 3% year over year,
beating the Zacks Consensus Estimate of $3,578 million. U.S.
revenues for the quarter inched up 2% to $1,466 million while
ex-U.S. sales were higher 3% (up 3% in constant currency) to $2,128
The Plasma Proteins business, where Baxter had encountered
structural problems in the past, did not do so well with revenues
of $397 million, down 4% (down 2% in constant currency) year over
year. Antibody Therapy delivered good results with sales of $406
million, climbing 5% (up 6% in constant currency) year over
Estimate Revision Trend
The overall trend in estimate revisions for Baxter demonstrated
little activity in the recent past. Of the 14 analysts covering the
stock, only 1 changed his/her estimate (in the upward direction),
for the current quarter, over the prior week and past month. The
same pattern was repeated (by 17 analysts covering the stock), for
the current year. The current Zacks Consensus Estimate for 2012 is
$4.54, reflecting an estimated 5.23% year-over-year
Given the general shortage of estimate revisions, the magnitude
of revisions, for the forthcoming quarter, has hit a plateau over
the last week and month. The estimate for fiscal 2012 has moved up
by only a penny over the prior week and month.
Baxter has produced positive surprises in three of the previous
four quarters and we expect a similar trend to continue. The
company produced an average earnings surprise of 3.74% over the
prior four quarters, meaning that it beat the Zacks Consensus
Estimate by that measure.
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
(SYNO), 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 regenerative
On the flip side, despite resilience in Plasma Proteins and
Antibody Therapy sub-segments, we are concerned about stagnation 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. Among others, the company competes
Becton, Dickinson and Company
) in certain niches. We currently have a Neutral long-term rating
on Baxter. The stock currently retains a Zacks #2 Rank, which
translates into a short-term "Buy" recommendation.
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