Earnings Scorecard: Baxter - Analyst Blog
02 Mayo 2011 - 4:45AM
Zacks
Baxter
International (BAX) reported first quarter adjusted
(excluding one-time items) earnings per share of 98 cents, beating
the Zacks Consensus Estimates of 93 cents, and surpassing the
year-ago results of 93 cents.
The results exceeded Baxter’s
earlier guidance range of 92 to 94 cents for the first quarter.
Among the positive factors, Baxter retains a strong product
pipeline with several products in late-stage clinical
development.
Highlights from the First
Quarter
Reported net income increased to
$570 million (or 98 cents per share) versus a loss of $63 million
(or 11 cents a share) a year ago. The first quarter results of 2010
included after-tax items aggregating $627 million (or $1.04 per
share) arising from the Colleague infusion pump and a change in
certain tax treatment.
Total revenues were $3,284 million,
up 12% year over year, beating the Zacks Consensus Estimate of
$3,178 million. Revenues in the prior year included an adjustment
of $213 million for the Colleague infusion pump. Excluding this
adjustment, worldwide sales grew 5% year over year. Domestic
revenues for the quarter jumped 10% to $1,422 million while
overseas sales were higher only 1% to $1,862 million.
The Plasma Proteins business, where
Baxter had encountered structural problems in the past, performed
well with revenues of $308 million, up 5% (up 8% in constant
currency) year over year. Antibody Therapy also delivered good
results with sales of $374 million, climbing 16% (up 18% in
constant currency) year over year.
We have discussed the quarterly results at length here: Baxter
Beats Fair and Square
Agreement – Estimate
Revisions
The overall trend in estimate
revisions for fiscal 2011 is overwhelmingly positive since the
release of the first quarter results. Out of a total of 18 analysts
covering the stock, 13 have raised their estimates over the past
month with no instance of downward revision. Likewise, 11 analysts
(out of a total of 18) have raised their forecasts for 2012 over
the past month with only 2 lowering their estimates.
A positive trend is also noticed,
over the past week, with 5 positive revisions and no downward
movement in estimate revisions for fiscal 2011. There were 6
positive revisions and 1 downward revision for fiscal 2012.
Improved execution by the company
led to the positive sentiment aided by ongoing turnaround of the
Plasma Proteins business.
Magnitude – Consensus
Estimate Trend
Upward estimate revisions,
accompanied by directional agreement for the most part, have led to
a rise in annual forecasts for Baxter. Estimates for 2011 and
2012 have gone up by 4 cents and 3 cents, respectively, over the
past 30 days. The current Zacks Consensus Estimate for fiscal 2011
is $4.25, reflecting an estimated 6.76% year-over-year growth.
Estimates for 2011 and 2012 have
gone up by a penny and 2 pennies, respectively, over the past 7
days.
Baxter Stays at
Neutral
Baxter issued its guidance for
second-quarter fiscal 2011 and raised its estimates for 2011. For
the second quarter, the company expects growth in revenues in the
range of 4% to 5% in constant currency, and adjusted earnings per
share in the range of $1.01 to $1.03.
Baxter anticipates growth in
revenues in the range of 3% to 4% (earlier 2% to 3%), in constant
currency, and adjusted earnings per share of about $4.20 to $4.28
(earlier $4.15 to $4.25) for fiscal 2011.
The news regarding Baxter remains
somewhat 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.
On the flip side, despite recent
improvement in Plasma Proteins and Antibody Therapy sub-segments,
we are concerned about stagnation in sales, a still somber outlook
for some hospital spending and tightening of reimbursement.
Improved execution has improved
sentiment toward Baxter. The company remains a good bet for value
investors willing to wait as fundamentals improve. Among others, it
competes with Becton, Dickinson and Company (BDX)
and Talecris Biotherapeutics Holdings Corp. (TLCR)
in certain niches. Our Neutral recommendation on the stock is
supported by a short-term Zacks #3 Rank (Hold).
About Earnings Estimate
Scorecard
Len Zacks, PhD in mathematics
from MIT, proved over 30 years ago that earnings estimate revisions
are the most powerful force impacting stock prices. He turned this
ground breaking discovery into two of the most celebrating stock
rating systems in use today. The Zacks Rank for stock trading in a
1 to 3 month time horizon and the Zacks Recommendation for
long-term investing (6+ months). These “Earnings Estimate
Scorecard” articles help analyze the important aspects of estimate
revisions for each stock after their quarterly earnings
announcements. Learn more about earnings estimates and our proven
stock ratings at http://www.zacks.com/education/.
BAXTER INTL (BAX): Free Stock Analysis Report
BECTON DICKINSO (BDX): Free Stock Analysis Report
TALECRIS BIOTHR (TLCR): Free Stock Analysis Report
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