Baxter International Inc.

Baxter International Inc. (BAX - Analyst Report) has risen over 34% since breaking from a sideways trend in Jul 2006. The recently released first-quarter results reinforce the company’s consistent earnings momentum and with the stock trading near 52-week highs on stronger-than-average volume, look for the underlying trend to continue.

Full Analysis

Baxter International Inc. is a diversified medical products and services company. It provides medical devices, pharmaceuticals and biotechnology that enable healthcare professionals and their patients in treating various medical conditions. It operates in three segments including BioScience, Medication Delivery and Renal. The BioScience segment manufactures plasma-based and recombinant proteins used to treat hemophilia and also provides technologies used in adult stem-cell therapies. The Medication Delivery segment manufactures intravenous solutions and administration sets, pre-mixed drugs and drug reconstitution systems, pre-filled vials and syringes for injectable drugs and electronic infusion devices. The Renal segment manufactures products for peritoneal dialysis and distributes products for hemodialysis.

On Apr 19, this Zacks #1 Rank stock reported first-quarter earnings of 61cents per share, up from 43 cents in the prior-year quarter and six cents above expectations. Driving the earnings growth, revenues rose 11% to $2.7 billion. Excluding the impact of foreign exchange, Baxter’s revenues rose 8%, exceeded its guidance range of 5% to 6%.

The company’s BioScience segment reported strength across all product lines, posting segment revenues of $1.1 billion, up 22% from the prior-year quarter. Medication Delivery revenues rose 8% to $990 million, largely due to strong international performance and sales of anesthesia products. Lastly, the Renal segment reported a 6% increase in revenues to $525 million on strong increases in peritoneal dialysis patients.

As a result of the 10.9% earnings surprise, Baxter increased its revenue and earnings outlook for the full-year 2007. The company now expects sales growth of 4% to 5% and earnings per share of $2.60 to $2.65. Prior to the release, Baxter expected earnings per share to be between $2.47 and $2.53 on revenue growth of 3% to 4%. For the second quarter, Baxter expects sales growth of 3% to 4% and earnings per share of 66 cents to 68 cents.

Baxter International has a strong history of exceeding quarterly expectations. In fact, Baxter has exceeded analysts’ estimates by an average of 6.4% over the last 10 consecutive quarters. In response to the latest earnings surprise, analysts increased full-year consensus estimates by 12 cents to $2.63.

BAX has outperformed the S&P 500 in each of the last three years and is currently up 23.6% for 2007, well above the S&P 500 return of 5.4%. After consolidating in a sideways trend from Apr 2005 to Jul 2006, BAX exploded to the upside and has since risen over 34%. With the stock trading near 52-week highs on stronger-than-average volume, look for the underlying trend to continue, supported by the consistent earnings momentum and upward estimate revisions.