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Baxter International Inc.
(BAX - Analyst Report
) reported second-quarter adjusted (excluding one-time items) earnings per share of $1.16, beating the Zacks Consensus Estimate by 3 cents and surpassing the year-ago earnings by 4%. The second-quarter result also exceeded the company’s earlier stated guidance of $1.12-$1.14.
Reported net income in the quarter decreased 10.7% year over year to $590 million (or $1.07 per share) compared with $661 million (or $1.19 per share) in the prior-year quarter. Baxter’s results in the reported quarter includes unusual after-tax amount of $49 million (or 9 cents per share) pertaining to the impending takeover of Gambro AB (expected to be complete during the third quarter).
Revenues for the quarter were $3,669 million, up 3% (up 4% at constant exchange rate or CER) year over year, missing the Zacks Consensus Estimate of $3,707 million.
On a geographic basis, U.S.-based revenues in the quarter improved 3% year over year to $1,546 million, while international revenues rose 3% year over year (up 4% at CER) to $2,123 million.
Business wise, Bioscience revenues stood at $1,638 million, up 5% year over year (up 6% at CER). Revenues were primarily driven by higher demand for Advate used in hemophilia, Feiba and certain specialty plasma-based therapeutics.
Hemophilia, the largest sub-unit, accounted for $849 million. Hemophilia increased 2% in reported terms (up 4% at CER) year over year. Year over year, BioTherapeutics revenues grew 6% both on a reported and CER basis to $513 million. Revenues from BioSurgery increased 2% year over year (up 2% at CER) to $178 million. Vaccines escalated to $98 million, up 24% (up 30% at CER) year over year.
Revenues from Medical Products inched up 1% (up 2% in constant currency) to $2,031 million in the quarter. Peritoneal dialysis products along with anesthesia offerings and injectable therapies led growth in revenues.
The four sub-units are: Fluid Systems with sales of $755 million, up 2% at CER; Renal with sales of $654 million, up 5% at CER; Specialty Pharmaceuticals with revenues of $366 million, up 1% at CER; and BioPharma Solutions with sales of $256 million, down 3% at CER.
Second-quarter adjusted gross margin increased 50 basis points year over year to 52.3%. Marketing and administrative expenses rose 6% to $838 million in the quarter, while research and development expenses dropped 11% to $273 million.
Baxter ended the second quarter with net debt of $3,046 million, up 2.9% year over year. Cash flow from operations dropped 21.2% year over year to $763 million.
For the third quarter of 2013, the company expects growth in revenues of 5% (6% at CER). Including the impact of the Gambro AB acquisition, revenues are projected to grow 9%–12% (10%–13% at CER) and adjusted earnings per share are expected to be in the band of $1.18 and $1.21. The Zacks Consensus Estimate for earnings per share of $1.17 for the third quarter is below the guided range.
Baxter revised its forecast for 2013, which includes the impact of its Gambro acquisition. For 2013, Baxter expects reported sales growth in the range of 8%–9% at CER) compared to the earlier projection of 10%.
The company raised its adjusted earnings per share forecast to the range of $4.62 to $4.70 (earlier $4.60 to $4.70) for 2013. The Zacks Consensus Estimate for 2013 earnings per share of $4.65 lies within the guided range. Baxter continues to expect cash flow from operations to be roughly $3,300 million for 2013.
We are impressed with Baxter’s ability to deliver solid bottom line results, despite the difficult Med-Tech environment. However, revenues and margins remain under pressure.
Further, the solid guidance provided by the company is encouraging. The company is poised to grow on the back of new products and acquisitions.
The stock currently carries a Zacks Rank #3 (Hold). Medical products companies such as Resmed
(RMD - Analyst Report
(ALR - Snapshot Report
) and Hanger
(HGR - Analyst Report
) are expected to do well. While Resmed carries a Zacks Rank #1 (Strong Buy), the other two are Zacks Rank #2 (Buy) stocks.