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Baxter (BAX) Beats on Q2 Earnings & Revenues, Ups EPS View

Zacks Equity Research

Baxter International Inc. BAX delivered second-quarter 2019 adjusted earnings of 89 cents per share, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. The bottom line also improved 15.6% from the year-ago quarter.

Revenues of $2.84 billion outpaced the Zacks Consensus Estimate of $2.79 billion by 1.9%. The top line fell 0.1% year over year on a reported basis but increased 4% on operational basis.

Geographical Details

Baxter reports operating results through three geographic segments — Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).

In Americas, Baxter recorded revenues of $1.52 billion, down 0.3% on a year-over-year basis but up 1% at constant currency (cc).

In EMEA, revenues totaled $744 million, down 1.9% from the year-ago quarter but up 6% at cc.

In APAC, revenues of $576 million increased 3% from the prior-year quarter and 9% at cc.

Baxter International Inc. Price, Consensus and EPS Surprise

Baxter International Inc. Price, Consensus and EPS Surprise

Baxter International Inc. price-consensus-eps-surprise-chart | Baxter International Inc. Quote

Segmental Details

Renal Care

This segment reported revenues of $910 million in the quarter under review, down 2.3% year over year. Revenues at the segment increased 3% at cc.

Medication Delivery

Revenues at the segment grossed $689 million, up 1.2% from the year-ago quarter and 4% at cc.

Pharmaceuticals

Revenues at the segment amounted to $539 million, up 0.4% from the year-ago quarter and 4% at cc.

Clinical Nutrition

Revenues at the segment were $215 million, down 2.7% from the year-ago quarter and 2% at cc.

Advanced Surgery

Revenues at the segment totaled $232 million, up 13.7% from the year-ago quarter and 17% at cc.

Acute Therapies

This segment reported revenues of $133 million, up 3.1% from the prior-year quarter and increased 8% at cc.

Other

Revenues in the segment grossed $122 million, down 12.2% on a year-over-year basis and 9% at cc.

Margin Analysis

Baxter registered adjusted gross profit of $1.26 billion in the second quarter, down 2.2% year over year. As a percentage of revenues, gross margin contracted 100 bps on a year-over-year basis at 44.5% in the second quarter.

Operating income decreased 7.6% year over year to $355 million in the quarter under review. As a percentage of revenues, operating margin contracted 100 bps to 12.5% in the second quarter.

Guidance

On the basis of the strong performance in the second quarter, Baxter raised earnings guidance for 2019.

Adjusted earnings are anticipated to be in the band of $3.34-$3.40 per share, up from the previously guided range of $3.27-$3.35 per share. The Zacks Consensus Estimate for earnings stands at $3.32, within the company’s guided range.

The company anticipates sales growth in the range of 1-2% on a reported basis, and about 4% on both cc and operational basis.

For the third quarter of 2019, management at Baxter expects revenues to grow in the range of 3-4% on a reported basis, and approximately 5% on both cc and operational basis. Adjusted earnings are projected to be in the range of 82-84 cents per diluted share. The Zacks Consensus Estimate is pegged at 85 cents, which lies above the guided range.

Summing Up

Baxter ended the second quarter of 2019 on a solid note, beating the Zacks Consensus Estimate on both counts. The stock continues to benefit from its core Medication Delivery, Advanced Surgery, Pharmaceuticals and Acute Therapies units.

Growth in APAC buoys optimism. The company has received FDA approval Myxredlin (Insulin Human in 0.9% Sodium Chloride Injection), which is the first and only ready-to-use insulin for IV infusion in the hospital and other acute care set up. Additionally, the company introduced the Sharesource 2.0 clinical portal that will offer the healthcare providers better insights to patients’ home PD treatments while offering improved clinic workflow. Further, Baxter revealed a new research on the Oxiris filter that can be utilized simultaneously in CRRT and in the removal of cytokines and endotoxin to manage acute kidney injury (AKI) patients with sepsis.

However, in the quarter under review, the company witnessed operating margin contraction. Meanwhile, Baxter’s Clinical Nutrition unit has been witnessing sluggishness in recent times. Cut throat competition in the MedTech markets is indicative of dull prospects.

Zacks Rank

Baxter currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

A few better-ranked stocks in the broader medical space are Hologic Inc. HOLX, DENTSPLY SIRONA Inc. XRAY and Teleflex Inc. TFX.

Hologic is scheduled to release second-quarter 2019 results on Jul 31. The Zacks Consensus Estimate for the to-be-reported quarter’s adjusted EPS is pegged at 61 cents and the same for revenues stands at $834.6 million. The stock carries a Zacks Rank #2 (Buy).

DENTSPLY SIRONA is scheduled to release second-quarter 2019 results on Aug 2. The Zacks Consensus Estimate for second-quarter adjusted EPS and revenues is 62 cents and $1.03 billion, respectively. The stock sports a Zacks Rank #1.

Teleflex is expected to release second-quarter 2019 results on Aug 1. The Zacks Consensus Estimate for adjusted EPS for the to-be-reported quarter is $2.59 and the same for revenues is pegged at $636.7 million. The stock has a Zacks Rank of 2.

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