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Reasons to Retain Baxter International (BAX) in Your Portfolio
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Baxter International (BAX - Free Report) is poised for growth, given the demand for its medically essential products, coupled with transformational actions. However, inflationary pressure remains a concern.
Shares of this Zacks Rank #3 (Hold) company have declined 24.1% year to date compared with the industry's 4.7% decline. The S&P 500 Index has increased 17.2% in the same time frame.
BAX, with a market capitalization of $19.58 billion, is a global medical technology company providing items such as kidney-dialysis equipment, infusion pumps and intravenous solutions. The company has an earnings yield of 6.6% compared with the industry's (1.8%). It anticipates earnings to improve 5.5% over the next five years.
Image Source: Zacks Investment Research
What's Driving the Performance?
Baxter International ended second-quarter 2023 with improvement in both earnings and revenues. Sales across all product categories were strong except for decline in Patient Support Systems, led by lower rental revenues. Robust growth rates across all geographies buoy optimism.
The company expects the demand for its medically essential products to continue amid stabilizing macroeconomic conditions and healthcare marketplace. BAX stated that the ongoing transformational actions, announced earlier this year, will likely boost its performance going forward.
The transformational actions, which include realigning its businesses and operations into four vertically integrated global business segments, are likely to be completed by July 2024. Baxter Internationalis also progressing with the proposed spin-off of its Kidney Care segment, comprising of Renal Care and Acute Therapies product categories, into an independent, publicly traded company. This is also a part of BAX’s transformational actions.
In the second quarter, revenues from continued operation totaled $3.71 billion, up 3% on a reported basis and 4% organically. Revenues from discontinued operation (BPS business) amounted to $142 million.
Notable Developments
In June, Baxter International announced the U.S. launch of its new Hillrom Progressa+ bed for the intensive care unit. Progressa+, which offers new technology and features, has been designed to make it easier for nurses to care for patients and support patient recovery.
In May, BAX had signed an agreement to divest its BioPharma Solutions business for $4.25 billion. The divesture is expected to close in the second half of this year. The company started reporting the business as discontinued operations from the second quarter of 2023.
What's Weighing on the Stock?
Although recovering, the company continues to face pressure for services related to hospital admissions and procedural volumes. Supply-chain disruptions continue to hurt growth albeit slowly compared with the last few quarters. Lower rental revenues and reduced hospital capital spending continue to impact top-line growth. A decline in sales in China due to excess mortality on ESRD patient volumes due to the pandemic, coupled with the ongoing implementation of value-based procurement initiatives, continues to hurt sales in the country.
Gross and operating profit declined year over year in the second quarter, reflecting inflationary pressure. Both gross and operating margins also contracted.
Estimates Trend
The Zacks Consensus Estimate for 2023 revenues is pegged at $14.83 billion, indicating a 1.9% decline from the previous year’s level. However, revenues are likely to recover in 2024 at an estimated growth rate of 4%.
The consensus mark for adjusted EPS is pinned at $2.55, indicating a 27.1% decrease from the year-ago reported number. The consensus estimate for adjusted EPS has declined 1.9% in the past 30 days. However, EPS is likely to recover in 2024 at an estimated growth rate of 21.4%.
Some better-ranked stocks in the broader medical space are Align Technology (ALGN - Free Report) , HealthEquity, Inc. (HQY - Free Report) and McKesson Corporation (MCK - Free Report) .
ALGN’s earnings surpassed estimates in two of the trailing four quarters and missed twice, delivering an average negative surprise of 1.76%. The company’s shares have risen 58.9% year to date compared with the industry’s 12% growth.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 22%. HQY’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 9.1%.
The company’s shares have rallied 13.6% year to date against the industry’s 10.6% decline.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.7%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 8.1%.
The stock has rallied 13% year to date compared with the industry’s 12% growth.
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Reasons to Retain Baxter International (BAX) in Your Portfolio
Baxter International (BAX - Free Report) is poised for growth, given the demand for its medically essential products, coupled with transformational actions. However, inflationary pressure remains a concern.
Shares of this Zacks Rank #3 (Hold) company have declined 24.1% year to date compared with the industry's 4.7% decline. The S&P 500 Index has increased 17.2% in the same time frame.
BAX, with a market capitalization of $19.58 billion, is a global medical technology company providing items such as kidney-dialysis equipment, infusion pumps and intravenous solutions. The company has an earnings yield of 6.6% compared with the industry's (1.8%). It anticipates earnings to improve 5.5% over the next five years.
Image Source: Zacks Investment Research
What's Driving the Performance?
Baxter International ended second-quarter 2023 with improvement in both earnings and revenues. Sales across all product categories were strong except for decline in Patient Support Systems, led by lower rental revenues. Robust growth rates across all geographies buoy optimism.
The company expects the demand for its medically essential products to continue amid stabilizing macroeconomic conditions and healthcare marketplace. BAX stated that the ongoing transformational actions, announced earlier this year, will likely boost its performance going forward.
The transformational actions, which include realigning its businesses and operations into four vertically integrated global business segments, are likely to be completed by July 2024. Baxter Internationalis also progressing with the proposed spin-off of its Kidney Care segment, comprising of Renal Care and Acute Therapies product categories, into an independent, publicly traded company. This is also a part of BAX’s transformational actions.
In the second quarter, revenues from continued operation totaled $3.71 billion, up 3% on a reported basis and 4% organically. Revenues from discontinued operation (BPS business) amounted to $142 million.
Notable Developments
In June, Baxter International announced the U.S. launch of its new Hillrom Progressa+ bed for the intensive care unit. Progressa+, which offers new technology and features, has been designed to make it easier for nurses to care for patients and support patient recovery.
In May, BAX had signed an agreement to divest its BioPharma Solutions business for $4.25 billion. The divesture is expected to close in the second half of this year. The company started reporting the business as discontinued operations from the second quarter of 2023.
What's Weighing on the Stock?
Although recovering, the company continues to face pressure for services related to hospital admissions and procedural volumes. Supply-chain disruptions continue to hurt growth albeit slowly compared with the last few quarters. Lower rental revenues and reduced hospital capital spending continue to impact top-line growth. A decline in sales in China due to excess mortality on ESRD patient volumes due to the pandemic, coupled with the ongoing implementation of value-based procurement initiatives, continues to hurt sales in the country.
Gross and operating profit declined year over year in the second quarter, reflecting inflationary pressure. Both gross and operating margins also contracted.
Estimates Trend
The Zacks Consensus Estimate for 2023 revenues is pegged at $14.83 billion, indicating a 1.9% decline from the previous year’s level. However, revenues are likely to recover in 2024 at an estimated growth rate of 4%.
The consensus mark for adjusted EPS is pinned at $2.55, indicating a 27.1% decrease from the year-ago reported number. The consensus estimate for adjusted EPS has declined 1.9% in the past 30 days. However, EPS is likely to recover in 2024 at an estimated growth rate of 21.4%.
Baxter International Inc. Price
Baxter International Inc. price | Baxter International Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are Align Technology (ALGN - Free Report) , HealthEquity, Inc. (HQY - Free Report) and McKesson Corporation (MCK - Free Report) .
Align Technology, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 17.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ALGN’s earnings surpassed estimates in two of the trailing four quarters and missed twice, delivering an average negative surprise of 1.76%. The company’s shares have risen 58.9% year to date compared with the industry’s 12% growth.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 22%. HQY’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 9.1%.
The company’s shares have rallied 13.6% year to date against the industry’s 10.6% decline.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.7%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 8.1%.
The stock has rallied 13% year to date compared with the industry’s 12% growth.