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Shares of Baxter International Inc. (BAX - Analyst Report) slid 0.3% to $76.09 yesterday after pharmaceutical behemoth Pfizer Inc. (PFE - Analyst Report) agreed to acquire a couple of marketed vaccines from the former for $635 million. The two vaccines include meningitis vaccine NeisVac-C and tick-borne encephalitis vaccine FSME-IMMUN/TicoVac.

The two vaccines are sold in some European countries and other markets outside the U.S. As part of the deal, Pfizer will gain partial control of BAX’s Orth facility in Austria where these life-saving vaccines are produced.

The fall in BAX shares is justified as the company has revealed that it expects the deal to mar its fourth quarter earnings and lower 2015 earnings by roughly 15 cents per share. Both the vaccines have combined sales of $300 million in a year.

BAX is on the verge of splitting its business into two entities – biopharmaceuticals/bioscience and medical devices. The company took the decision to split up its business in order to put greater management focus on the two segments, effectively commercialize product offerings, efficiently allocate resources to high growth areas, and bring flexibility in deciding on growth and investment strategies. The split-up is expected to be completed in mid-2015.

BAX’s BioScience business will focus on immune deficiencies and blood-related disorders and includes the plan to form a partnership or sale of its drug development programs based on the flu and Lyme diseases.

On the other hand, BAX’s medical device business will continue to focus on intravenous (IV) solutions, injectable drugs, anesthetics, and other equipments. (See Baxter Hits 52-Week High on Planned Business Split-Up for more details).

BAX posted a 5.0% rise in adjusted net earnings to $692 million or $1.26 per share for the second quarter of 2014 from $659 million or $1.20 per share in the same quarter a year back. With this, earnings per share not only surpassed the company’s previously issued guidance of $1.18 to $1.22 but also the Zacks Consensus Estimate by 5 cents.

Revenues in the quarter went up 16.2% to $4,264 million globally and exceeded the Zacks Consensus Estimate of $4,112 million. Excluding the $408 million contribution from the Gambro acquisition, revenues in the quarter grew 5%.

For the third quarter of 2014, BAX expects revenues to grow between 12 and 13%, barring the impact of foreign currency. The company also expects adjusted earnings in the range of $1.28 to $1.32 per share for the quarter. The current Zacks Consensus Estimate of $1.31 lies within the guided range.
 
For full year 2014, BAX expects higher revenue growth of 10 to 11% compared with the prior view of 9 to 10%, excluding the impact of foreign exchange.

However, BAX narrowed its adjusted earnings per share guidance to $5.10 to $5.20 from the earlier band of $5.05 and $5.25. The Zacks Consensus Estimate of $5.16 for the year lies within the guided range.

Currently, BAX retain a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical products industry include Hospira Inc. (HSP - Analyst Report) and Wright Medical Group Inc. (WMGI - Analyst Report). Both of them carry a Zacks Rank #1 (Strong Buy) at present.

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