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Baxter (BAX) to Post Q2 Earnings: What's in the Offing?

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Baxter International Inc. (BAX - Free Report) is scheduled to release second-quarter 2023 results on Jul 27, before the opening bell. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 22.92%. BAX’s earnings missed estimates in two of the trailing four quarters, met once and beat in the other, delivering an average surprise of 3.85%.

Q2 Estimates

Currently, the consensus estimate for second-quarter revenues is pegged at $3.79 billion, indicating an improvement of 1.3% from the prior-year quarter’s figure. The same for earnings is pinned at 59 cents per share, implying a 32.2% year-over-year decline.

Factors to Note

For the second quarter, Baxter expects sales to grow 1-2% on a reported basis and 2-3% at constant currency basis. Adjusted earnings per share is expected between 59 cents and 61 cents. Earnings outlook for the quarter reflects inflationary pressure, rising interest expense and higher tax rate.

Robust demand for Baxter’s broad multi-chamber product offering is likely to have continued in the second quarter, driving sales of its Clinical Nutrition segment. Moreover, a continued rise in surgical volume and elective surgical procedures is expected to have fueled strong growth in Advanced Surgery’s sales.

Our estimate for Clinical Nutrition and Advanced Surgery’s second-quarter 2023 sales is pegged at $231.2 million and $260.9 million, respectively.

Renal Care segment sales reflected recovering trend during the first quarter, following a decline in the previous two quarters. However, a potential decline in China due to the impact of various government-based procurement initiatives might have continued to hurt Renal sales during the soon-to-be-reported quarter.

Meanwhile, strong growth in Baxter’s PD business and IV therapy portfolio is likely to have been more than offset by lower in-center HD sales, lower infusion system sales and unfavorable currency movement. Our estimate for the segment’s sales is pegged at $966.3 million.

The company has multiple collaborations to help manufacture COVID-19 vaccines. However, sales growth of the BioPharma Solutions segment is likely to have been hurt by challenging year-over-year comparisons, resulting from prior-year COVID-related sales.

Sales at Acute Therapies segment are also expected to have experienced a similar impact in the soon-to-be-reported quarter. Our estimate for BioPharma Solutions and Acute Therapies’ sales is pegged at $165.7 million and $155 million, respectively.

Sales of the Pharmaceutical segment are likely to have been boosted by strong growth in U.S. injectables portfolio, partially offset by lower sales for injectables in the international market. Our estimate for the segment’s sales is pinned at $525 million.

In the first quarter of 2023, all of Baxter’s global regions performed weakly due to unfavorable currency movements. In the Americas, the company reported revenues of $1.6 billion, down 1% from the prior-year quarter’s level.

In EMEA, revenues totaled $714 million, up 2% from the year-ago quarter’s figure. In APAC, revenues of $602 million were down 4% year over year. The trend is likely to have continued in the to-be-reported quarter.

Meanwhile, three new product categories that were added with the Hillrom buyout in December 2021 generated $731 million in the first quarter. These products are likely to have brought additional sales during the second quarter.

Continued demand for the physical assessment and cardiology portfolios within the Front Line Care business might have driven Hillrom’s second-quarter sales. Meanwhile, inflationary pressure as well as freight and supply-chain constraints are likely to have increased cost of goods, hurting gross margin. However, these headwinds are likely to be softer than those in the last reported quarter.

Baxter has proposed the spin-off of its Kidney Care company, including Renal Care and Acute Therapies businesses, earlier this year. It expects to complete the spin-off by July 2024 or earlier.  

The company is also pursuing strategic alternatives for its BioPharma Solutions business. Investors may ask questions related to the proposed spin-off during the company’s second-quarter earnings call. BAX may provide an update related to its progress with strategic alternatives for BioPharma Solutions business.

In June, Baxter launched Progressa+ bed for intensive care units in the United States. This bed has been designed to help nurses care for patients and support patient recovery. The company may provide an update on the launch progress on its second-quarter earnings call.

What the Zacks Model Unveils

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (50 cents per share) and the Zacks Consensus Estimate (59 cents per share), is -5.83%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Intuitive Surgical currently has a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this reporting cycle.

McKesson (MCK - Free Report) has an Earnings ESP of +1.93% and a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company's shares have rallied 9.5% year to date. MCK’s earnings beat estimates in the last reported quarter. McKesson has a four-quarter earnings surprise of 4.48%, on average.

Avanos Medical (AVNS - Free Report) has an Earnings ESP of +0.74% and a Zacks Rank of 3 at present.

The company's shares have lost 3.5% year to date. AVNS’ earnings missed estimates in the last reported quarter. It has a training four-quarter average earnings surprise of 8.03%.

Pacific Biosciences of California (PACB - Free Report) has an Earnings ESP of +5.88% and a Zacks Rank of 3 at present.

The company's shares have risen 67.3% year to date. PACB’s earnings beat estimates in the last reported quarter. It has a negative four-quarter average earnings surprise of 3.66%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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