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Baxter International (BAX - Analyst Report) is set to report its fourth-quarter 2012 results before the opening bell on Thursday, Jan 24. Let’s see how things are shaping up prior to the announcement.

In the last quarter, the company did not post any earnings surprise reflecting indifferent performance by the company.

Factors to Consider this Past Quarter

The news regarding Baxter still remains somewhat mixed. On the positive side, Baxter’s focus on life-sustaining products which are not commoditized, partly insulate it from an economic downturn. The company is able to generate recurring revenues, and consistent cash flow, due to its focus on chronic diseases. Among other positive factors, Baxter retains a strong product pipeline with several products in late-stage clinical development.

On the flip side, despite resilience in certain sub-segments, we are concerned about relative stagnation in sales, a slightly somber outlook for hospital spending and tightening of reimbursement.

Improved execution has lifted sentiment somewhat toward Baxter. It is a good bet for value investors willing to wait as fundamentals improve further.

Earnings Whispers?

Our proven model does not conclusively show that Baxter is likely to beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks Earnings ESP:  The Most Accurate estimate stands at $1.25, while the Zacks Consensus Estimate is pegged at $1.26. This comes to a difference of -0.79%.

Zacks Rank #3 (Hold).Baxter’s Zacks Rank #3 (Hold) lowers the predictive power of ESP. The Zacks Rank #3 together with negative ESP earnings makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right ingredients to post an earnings beat this quarter:

NuVasive Inc.(NUVA - Snapshot Report), Earnings ESP of 72.73% and Zacks Rank #1 (Strong Buy)

Hill-Rom Holdings, Inc.(HRC - Snapshot Report), Earnings ESP of 2.27% and Zacks Rank #2 (Buy)

Becton, Dickinson and Company (BDX - Analyst Report), Earnings ESP of 3.25% and Zacks Rank #2 (Buy).

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