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Baxter (BAX) Beats on Q4 Earnings & Revenues, '18 View Solid

Zacks Equity Research

Baxter International Inc. BAX reported fourth-quarter 2017 adjusted earnings per share of 64 cents, which beat the Zacks Consensus Estimate by 5 cents and improved from the year-ago quarter’s figure of 57 cents. Baxter has a Zacks Rank #3 (Hold).

The figure also came in above the company’s guidance of 56-59 cents. Over the last four quarters, the company delivered positive earnings surprises, the average being 10.6%.

Baxter posted sales of $2.77 billion, marginally beating the Zacks Consensus Estimate of $2.76 billion. At constant currency (cc), revenues increased 3% on a year-over-year basis. U.S. sales were up 1% year over year to $1.1 billion. International sales increased 4% at cc to almost $1.6 billion.

Baxter International Inc. Price, Consensus and EPS Surprise

 

Baxter International Inc. Price, Consensus and EPS Surprise | Baxter International Inc. Quote

Segmental Details

Hospital Products

Sales at the hospital products segment rose 3% at cc on a year-over-year basis to $1.7 billion. Hospital Products sales in the quarter were driven by solid sales in the U.S. fluid systems and select anesthesia and critical care products.

Hospital Sales were also driven by solid demand for injectable pharmaceuticals and hospital pharmacy compounding services. Sales in the segment benefited from solid demand for the company’s advanced surgery products and cytotoxic contract manufacturing services.

Renal Products

Sales in the segment increased 3% at cc to $1.1 billion. Renal products sales were supported by improved performance in all major product lines and therapies, globally. Notably, solid performance in chronic and acute renal therapies drove sales in the segment.

Consistent Efforts to Increase Production

Per management, the company’s Puerto Rico facilities, affected by the Hurricanes, are ramping up production. Additionally, Baxter has been working closely with FDA to support supply of certain products in the domestic market, which were cautioned for importation from Baxter’s facilities in Ireland, Australia, Canada, Mexico, England, Italy and Brazil.

In the fourth quarter, Baxter launched the oXIRIS set for continuous renal replacement therapy (CRRT) and sepsis management protocols in select markets of Europe, Middle East and Africa. oXIRIS, which leverages on the company’s flagship PRISMAFLEX system, is expected to lend the company a competitive edge in the global market.

Recently, the company upgraded the SIGMA Spectrum Infusion System with the launch of DeviceVue Advanced Asset Tracking System. Baxter is the first and only smart infusion pump manufacturer to offer a tagless, end-to-end acid tracking application designed in consultation with potential customers to drive operational efficiencies and maximize the clinical value of their pump investments.

Guidance

For 2018, Baxter estimates sales growth of approximately 6-7% at cc. Adjusted earnings for the full year are expected in the band of $2.72 to $2.80 per share.

Baxter expects first-quarter in the range of 60-62 cents. However, Baxter expects sales in the first quarter to be affected by approximately $25 million due to disruptions in the Puerto Rico facility.

2017 at a Glance

In 2017, Baxter registered revenues of $10.6 billion, up 4% at cc on a year-over-year basis. Sales of Hospital Products totaled $6.6 billion (62.3% of net sales). Baxter’s Renal sales totaled more than $3.9 billion in the year (36.7% of net sales).

Baxter increased the annual dividend rate by 23% and repurchased $564 million worth of shares, while also pursuing internal and external initiatives to augment growth

Our Take

Baxter ended the fourth quarter on an encouraging note, beating the Zacks Consensus Estimate on both the counts. The company's impressive performance at the hospital products and renal segments hold promise. Recently, Baxter launched the oXIRIS set for continuous renal replacement therapy (CRRT) and sepsis management protocols in select markets of Europe, Middle East and Africa. Further, the recent launch of DeviceVue, a comprehensive asset tracking solution available exclusively to hospitals, boosts the company’s product portfolio.

On the flip side, foreign currency headwinds, intense competition and lackluster sales growth have been dampening Baxter’s performance since long. Generic competition for cyclophosphamide is a headwind. Further, the recent hurricanes are expected to dent the company’s results in the near term.

Companies Reporting Solid Earnings Results

A few better-ranked stocks that reported decent results this earnings season are PetMed Express PETS, PerkinElmer PKI and Accuray ARAY. While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and Accuray carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed recently reported third-quarter fiscal 2018 results. Adjusted earnings per share was 44 cents, up 88.3% from the prior-year quarter. Revenues rose 13.7% on a year-over-year basis to $60.1 million.

PerkinElmer reported fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.

Accuray reported a loss of 6 cents per share in second-quarter fiscal 2018, 5 cents narrower than the year-ago figure. Total revenues in the second quarter improved 15% year over year to $100.3 million.

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