March 29, 2024

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Baxter (BAX) Up 2.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Baxter International (BAX). Shares have added about 2.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Baxter due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Baxter Q4 Earnings Beat Estimates, Revenues In Line

Baxter International Inc. reported fourth-quarter 2019 adjusted earnings of 97 cents per share, which surpassed the Zacks Consensus Estimate of 88 cents by 10.2%. The bottom line also improved 36.6% from the year-ago quarter.

For the full-year 2019, adjusted EPS came in at $3.31, up 13.7% from that of 2018. However, the figure missed the Zacks Consensus Estimate by 2.4%.

Revenues in Detail

Revenues of $3.04 billion matched the Zacks Consensus Estimate. The top line improved 7.3% year over year on a reported basis and 9% on operational basis.

For the full-year 2019, revenues totaled $11.36 billion, up 2.4% on a reported basis and 5% on an operational basis. The metric came in line with the Zacks Consensus Estimate.

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 reported revenues of $1.63 billion, up 9.4% on a year-over-year basis and 10% at constant currency (cc).

In EMEA, revenues totaled $789 million, up 3% from the year-ago quarter and 5% at cc.

In APAC, revenues of $618 million increased 7.5% from the prior-year quarter and 9% at cc.

Segmental Details

Renal Care

This segment reported revenues of $960 million in the quarter under review, up 0.9% year over year. Revenues at the segment increased 2% at cc.

Medication Delivery

Revenues at the segment grossed $775 million, up 17.8% from the year-ago quarter and 19% at cc.

Pharmaceuticals

Revenues at the segment amounted to $580 million, up 7.6% from the year-ago quarter and 9% at cc.

Clinical Nutrition

Revenues at the segment were $233 million, up 8.4% from the year-ago quarter and 10% at cc.

Advanced Surgery

Revenues at the segment totaled $231 million, up 8.5% from the year-ago quarter and 10% at cc.

Acute Therapies

This segment reported revenues of $144 million, up 5.9% from the prior-year quarter and increased 7% at cc.

Other

Revenues in the segment grossed $122 million, down 4.1% on a year-over-year basis and 3% at cc.

Margin Analysis

Baxter registered gross profit of $1.29 billion in the fourth quarter, up 9.7% year over year. As a percentage of revenues, gross margin expanded 90 bps on a year-over-year basis at 42.7% in the fourth quarter.

Operating income surged 37.1% year over year to $536 million in the quarter under review. As a percentage of revenues, operating margin expanded 380 bps to 17.6% in the fourth quarter.

Guidance

Due to the high-degree of uncertainty surrounding COVID-19 and any potential negative financial impacts from the same, Baxter is not issuing any guidance for full-year 2020. The company projects to provide an update in its first quarter 2020 earnings announcement on Apr 30, 2020.

For first-quarter 2020, the company anticipates sales growth in the range of 4-5% on a reported basis, and 5-6% on both cc and operational basis.

Adjusted earnings are projected to be in the range of 72-74 cents per diluted share. The Zacks Consensus Estimate is pegged at 81 cents.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -13.11% due to these changes.

VGM Scores

At this time, Baxter has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It’s no surprise Baxter has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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