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Here's Why You Should Retain Baxter (BAX) Stock For Now

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Baxter International Inc. (BAX - Free Report) is well poised for growth in the coming quarters, backed by a strong product portfolio. A robust third-quarter 2021 performance, along with the company’s strength in the renal-care space, is expected to contribute further. However, generic competition for cyclophosphamide and a sluggish macroeconomic environment are worrying.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 6.2% against 8.7% fall of the industry it belongs to. The S&P 500 composite rose 23.3% in the said time frame.

The renowned global medical technology company has a market capitalization of $43.75 billion. The company projects 9.5% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 10.16% for the past four quarters, on average.

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Let’s delve deeper.

Strength in Renal-Care Space: We are optimistic about Baxter’s provision of hemodialysis and peritoneal dialysis (“PD”), as well as new therapies like expanded hemodialysis and remote patient management, which have fortified the company’s position in the renal care space. Renal care products include AMIA Automated PD System with SHARESOURCE Remote Patient Management System, SHARESOURCE Remote Patient Management System, BICART Cartridge, Cartridge Blood Set, among others. Baxter continues to experience robust growth in global demand for CRRT therapies despite the ongoing COVID-19 pandemic.

Strong Product Portfolio: We are upbeat about Baxter’s impressive product portfolio with improved existing products and new product development. Management has announced plans of introducing new therapies and products, which are expected to further contribute to sales, by 2023. Baxter’s product pipeline comprises the addition of generic injectables and the next generation of its premix technology, among other notable mentions.

Strong Q3 Results: Baxter’s solid third-quarter 2021 results buoy optimism. The company witnessed strong performance across all of its business units. Growth in Americas, EMEA and APAC is encouraging. Expansion in both gross and operating margins fuels further optimism. Regulatory approvals, product launches and buyouts are primary highlights.

Downsides

Sluggish Macroeconomic Environment: Baxter depends on the European Union for about a third of its sales. This is a cause for concern, given the sluggish macroeconomic environment, a glum outlook for hospital spending and tightening of reimbursement. The outlook also remains slightly uneasy in the United States, where demand for many health care products is soft, with an expectation of further price cuts on account of health care reforms.

Generic Competition for Cyclophosphamide: Cyclophosphamide is a part of Baxter's Hospital Products segment. However, Baxter’s cyclophosphamide performance over the last five years has lacked luster for the most part. Lower cyclophosphamide sales pose threats to the Integrated Pharmacy Solutions franchise business. Despite a promising portfolio, the company has failed to grab significant market share and substantially grow its top line, thanks to generic competition for cyclophosphamide.

Estimate Trend

Baxter is witnessing a positive estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 1.5% north to $4.06.

The Zacks Consensus Estimate for the company’s fourth-quarter 2021 revenues is pegged at $3.35 billion, suggesting a 5.2% improvement from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp, Henry Schein, Inc. (HSIC - Free Report) and AMN Healthcare Services (AMN - Free Report) .

LabCorp, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 10.6%. LH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.73%. You can see the complete list of today’s Zacks #1 Rank stocks here.

LabCorp has gained 35.1% compared with the industry’s 5.3% rise over the past year.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.86%. It currently carries a Zacks Rank #2 (Buy).

Henry Schein has gained 7.9% compared with the industry’s 5.3% rise over the past year.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 19.51%. It currently flaunts a Zacks Rank #1.

AMN Healthcare has gained 65.8% against the industry’s 55.8% fall over the past year.