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Baxter (BAX) Earnings and Revenues Miss Estimates in Q2

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Baxter International Inc. (BAX - Free Report) reported second-quarter 2020 adjusted earnings of 64 cents per share, which missed the Zacks Consensus Estimate of 71 cents by 9.9%. Moreover, the bottom line declined 23.8% from the year-ago quarter.

Revenues of $2.72 billion lagged the Zacks Consensus Estimate of $2.87 billion by 5.2%. The top line decreased 4.1% year over year on a reported basis, while 1% and 2% on a constant currency (cc) and operational basis, respectively.

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 $1.41 billion, down 7.4% on a year-over-year basis and 5% at cc.

In EMEA, revenues totaled $731 million, down 1.5% from the year-ago quarter but up 1% at cc.

In APAC, revenues of $580 million improved 1.2% from the prior-year quarter and 5% at cc.

Segmental Details

Renal Care

This segment reported revenues of $919 million in the quarter under review, up 1.3% year over year. Revenues at the segment increased 5% at cc.

Medication Delivery

Revenues at the segment amounted to $612 million, down 11.2% from the year-ago quarter and 9% at cc.

Baxter International Inc. Price, Consensus and EPS Surprise

Baxter International Inc. Price, Consensus and EPS Surprise

Baxter International Inc. price-consensus-eps-surprise-chart | Baxter International Inc. Quote

Pharmaceuticals

Revenues at the segment totaled $485 million, down 9.9% from the year-ago quarter and 7% at cc.

Clinical Nutrition

Revenues at the segment were $219 million, up 1.9% from the year-ago quarter and 5% at cc.

Advanced Surgery

Revenues at the segment totaled $168 million, down 27.3% from the year-ago quarter and 27% at cc.

Acute Therapies

This segment reported revenues of $186 million, up 40.9% from the prior-year quarter and 45% at cc.

Other

Revenues in the segment were $129 million, up 5.7% on a year-over-year basis and 7% at cc.

Margin Analysis

Baxter reported gross profit of $1.04 billion in the second quarter, down 9.9% year over year. As a percentage of revenues, gross margin contracted 250 bps on a year-over-year basis at 38.2% in the second quarter.

Operating income fell 5.4% year over year to $331 million in the quarter under review. As a percentage of revenues, operating margin contracted 20 bps to 12.2% in the quarter under review.

Guidance

For full-year 2020, Baxter anticipates sales growth between (1%) and 1% on a reported basis. On both constant currency and operational basis, sales growth is expected to be flat to up low-single digits.

Adjusted earnings per share is estimated in the range of $3-$3.10.

It is important to mention here that the aforementioned outlook takes into account, among other factors, a sequential improvement on a quarterly basis in both hospital admissions and surgical volumes although still below year-ago period levels.

Summing Up

Baxter ended second-quarter 2020 on a weak note, with both earnings and revenues missing the Zacks Consensus Estimate. Nonetheless, the company saw strong performance across all its segments. It also witnessed solid performance across Renal Care, Clinical Nutrition, Acute Therapies and Other segments. Growth in APAC instills optimism.

The company received FDA clearance of Altapore Shape Bioactive Bone Graft, which is the latest addition to Baxter’s next-generation bone graft substitute product line.

Moreover, Baxter announced CE marking in Europe and regulatory approval from Australia’s Therapeutic Goods Administration (TGA) for the Evo IQ Syringe Infusion System. This can be utilized to deliver small volumes of medications and other fluids to patients in a controlled manner. The device is part of the broader Evo IQ Infusion Platform and is supported by Baxter’s web-based Dose IQ Safety Software and wireless IQ Enterprise Connectivity Suite.

Meanwhile, weak performance across Medication Delivery, Pharmaceuticals and Advanced Surgery segments is a dampener. Also, contraction in both gross and operating margins raises concern. Further, cut-throat competition in the MedTech markets remains a woe.

Zacks Rank

Baxter currently carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the broader medical space are Thermo Fisher Scientific Inc. (TMO - Free Report) , PerkinElmer, Inc. (PKI - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, surpassing the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

LabCorp reported second-quarter 2020 EPS of $2.57, outpacing the Zacks Consensus Estimate of 78 cents. Revenues of $2.77 billion surpassed the consensus estimate by 14.3%.

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