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Baxter (BAX) Q4 Earnings Miss Estimates, FY23 Outlook Weak
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Baxter International Inc. (BAX - Free Report) reported fourth-quarter 2022 adjusted earnings per share (EPS) of 88 cents, significantly missing the Zacks Consensus Estimate of 94 cents. The bottom line declined 15% from the year-ago quarter as costs and expenses rose due to inflationary pressures, the negative impact of foreign exchange and higher interest expense.
GAAP EPS in the quarter was 36 cents, down 23% from the prior-year quarter. The decline was due to the recognition of one-time special items totaling $263 million after tax.
Revenue Details
Revenues of $3.89 billion beat the Zacks Consensus Estimate of $3.77 billion. The top line improved 11% year over year on a reported basis and 17% on a constant currency (cc) basis. Sales grew 2% on an operational basis — excluding the impacts of foreign exchange and the December 2021 acquisition of Hillrom.
Geographical Details
Baxter reported operating results through three geographic segments — Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).
In the Americas, Baxter revenues totaled $1.74 billion, down 1% on a year-over-year basis and flat at cc.
In EMEA, revenues totaled $750 million, down 8% from the year-ago quarter while up 5% at cc.
In APAC, revenues of $668 million declined 9% from the prior-year quarter while up 2% at cc.
Baxter International Inc. Price, Consensus and EPS Surprise
Following the Hillrom buyout (in December 2021), Baxter added three new product categories — Patient Support Systems, Front Line Care and Surgical Solutions. During the quarter under review, the company recorded $734 million in sales from Hilrom’s businesses. Patient Support Systems reported revenues of $360 million, while Front Line Care and Surgical Solutions delivered revenues of $293 million and $81 million, respectively. Sales of the segments have increased sequentially for the last two reported quarters.
Renal Care
This segment reported revenues of $981 million in the quarter under review, down 5% from the prior-year quarter but up 3% at cc.
Medication Delivery
Revenues at the segment amounted to $745 million, down 5% from the year-ago quarter and down 2% at cc.
Pharmaceuticals
Revenues at the segment totaled $525 million, down 9% from the year-ago quarter and down 1% at cc.
Clinical Nutrition
Revenues at the segment were $231 million, down 2% from the year-ago quarter but up 6% at cc.
Advanced Surgery
Revenues at the segment amounted to $247 million, up 2% from the year-ago quarter and up 8% at cc.
Acute Therapies
This segment reported revenues of $158 million, down 10% from the prior-year quarter and down 3% at cc.
BioPharma Solutions
This segment reported revenues of $172 million, up 6% from the prior-year quarter and up 12% at cc.
Other
Revenues in the segment were $38 million, up 23% on a year-over-year basis and at cc.
Margin Analysis
Baxter reported an adjusted gross profit of $1.62 billion for the fourth quarter, up 3.9% year over year. As a percentage of revenues, the gross margin declined 270 basis points (bps) to 41.6% in the fourth quarter.
Selling, general and administrative expenses amounted to $912 million, up 3% from the year-ago quarter. Research and development expenses were $155 million, up 12% on a year-over-year basis.
Adjusted operating income were down 6.6% year over year at $663 million in the quarter under review. As a percentage of revenues, the operating margin contracted 310 bps to 17.1% in the quarter under review.
2023 Guidance Issued
For first-quarter 2023, Baxter anticipates sales to decline by 3% on a reported basis and 1% at cc.
For the same period, adjusted EPS is expected between 46 cents and 50 cents. The Zacks Consensus Estimate for the same is pegged at 77 cents per share.
For full-year 2023, Baxter anticipates sales to improve 1-2%. Sales are expected to remain flat or grow by 1% at cc.
Adjusted earnings per share are estimated in the range of $2.75-$2.95 in 2023. The Zacks Consensus Estimate for the same stands at $3.56.
Summing Up
Baxter ended fourth-quarter 2022 on a dismal note, wherein revenues beat the Zacks Consensus Estimate and earnings missed the same. The company witnessed lower sales across five of its business units. Contraction in growth rates across all geographies and gross and operating margins is concerning. Unfavorable currency movement hurt the sales growth rate. Moreover, earnings outlook for 2023 is significantly lower than market expectations, reflecting inflationary pressures, rising interest expense and higher tax rate.
Meanwhile, cut-throat competition in the MedTech market remains a woe. An increase in selling, general and administrative expenses is concerning. Weakness in Renal Care, Pharmaceuticals, BioPharma Solutions and Acute Therapies is disappointing.
Zacks Rank and Stocks to Consider
Currently, Baxter carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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Baxter (BAX) Q4 Earnings Miss Estimates, FY23 Outlook Weak
Baxter International Inc. (BAX - Free Report) reported fourth-quarter 2022 adjusted earnings per share (EPS) of 88 cents, significantly missing the Zacks Consensus Estimate of 94 cents. The bottom line declined 15% from the year-ago quarter as costs and expenses rose due to inflationary pressures, the negative impact of foreign exchange and higher interest expense.
GAAP EPS in the quarter was 36 cents, down 23% from the prior-year quarter. The decline was due to the recognition of one-time special items totaling $263 million after tax.
Revenue Details
Revenues of $3.89 billion beat the Zacks Consensus Estimate of $3.77 billion. The top line improved 11% year over year on a reported basis and 17% on a constant currency (cc) basis. Sales grew 2% on an operational basis — excluding the impacts of foreign exchange and the December 2021 acquisition of Hillrom.
Geographical Details
Baxter reported operating results through three geographic segments — Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).
In the Americas, Baxter revenues totaled $1.74 billion, down 1% on a year-over-year basis and flat at cc.
In EMEA, revenues totaled $750 million, down 8% from the year-ago quarter while up 5% at cc.
In APAC, revenues of $668 million declined 9% from the prior-year quarter while up 2% at cc.
Baxter International Inc. Price, Consensus and EPS Surprise
Baxter International Inc. price-consensus-eps-surprise-chart | Baxter International Inc. Quote
Segmental Details
Following the Hillrom buyout (in December 2021), Baxter added three new product categories — Patient Support Systems, Front Line Care and Surgical Solutions. During the quarter under review, the company recorded $734 million in sales from Hilrom’s businesses. Patient Support Systems reported revenues of $360 million, while Front Line Care and Surgical Solutions delivered revenues of $293 million and $81 million, respectively. Sales of the segments have increased sequentially for the last two reported quarters.
Renal Care
This segment reported revenues of $981 million in the quarter under review, down 5% from the prior-year quarter but up 3% at cc.
Medication Delivery
Revenues at the segment amounted to $745 million, down 5% from the year-ago quarter and down 2% at cc.
Pharmaceuticals
Revenues at the segment totaled $525 million, down 9% from the year-ago quarter and down 1% at cc.
Clinical Nutrition
Revenues at the segment were $231 million, down 2% from the year-ago quarter but up 6% at cc.
Advanced Surgery
Revenues at the segment amounted to $247 million, up 2% from the year-ago quarter and up 8% at cc.
Acute Therapies
This segment reported revenues of $158 million, down 10% from the prior-year quarter and down 3% at cc.
BioPharma Solutions
This segment reported revenues of $172 million, up 6% from the prior-year quarter and up 12% at cc.
Other
Revenues in the segment were $38 million, up 23% on a year-over-year basis and at cc.
Margin Analysis
Baxter reported an adjusted gross profit of $1.62 billion for the fourth quarter, up 3.9% year over year. As a percentage of revenues, the gross margin declined 270 basis points (bps) to 41.6% in the fourth quarter.
Selling, general and administrative expenses amounted to $912 million, up 3% from the year-ago quarter. Research and development expenses were $155 million, up 12% on a year-over-year basis.
Adjusted operating income were down 6.6% year over year at $663 million in the quarter under review. As a percentage of revenues, the operating margin contracted 310 bps to 17.1% in the quarter under review.
2023 Guidance Issued
For first-quarter 2023, Baxter anticipates sales to decline by 3% on a reported basis and 1% at cc.
For the same period, adjusted EPS is expected between 46 cents and 50 cents. The Zacks Consensus Estimate for the same is pegged at 77 cents per share.
For full-year 2023, Baxter anticipates sales to improve 1-2%. Sales are expected to remain flat or grow by 1% at cc.
Adjusted earnings per share are estimated in the range of $2.75-$2.95 in 2023. The Zacks Consensus Estimate for the same stands at $3.56.
Summing Up
Baxter ended fourth-quarter 2022 on a dismal note, wherein revenues beat the Zacks Consensus Estimate and earnings missed the same. The company witnessed lower sales across five of its business units. Contraction in growth rates across all geographies and gross and operating margins is concerning. Unfavorable currency movement hurt the sales growth rate. Moreover, earnings outlook for 2023 is significantly lower than market expectations, reflecting inflationary pressures, rising interest expense and higher tax rate.
Meanwhile, cut-throat competition in the MedTech market remains a woe. An increase in selling, general and administrative expenses is concerning. Weakness in Renal Care, Pharmaceuticals, BioPharma Solutions and Acute Therapies is disappointing.
Zacks Rank and Stocks to Consider
Currently, Baxter carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.