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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 lost 28% year to date compared with the industry's 6.3% decline. The S&P 500 Index has increased 16.6% in the same time frame.
BAX, with a market capitalization of $18.61 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 7.1% compared with the industry's (1.8%). It anticipates earnings to improve 5.2% over the next five years.
Image Source: Zacks Investment Research
What's Driving the Performance?
Baxter Internationalended third-quarter 2023 with an improvement in both earnings and revenues. Sales across all product categories were strong except for a decline in the Care & Connectivity Solutions category, led by lower rental revenues and hospital capital spending.
The company expects the demand for its medically essential products to continue amid stabilizing macroeconomic conditions and the 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.
On its third-quarter earnings call, Baxter Internationalannounced that it completed the divestment of its BioPharma Solutions (BPS) business at the end of the third quarter. In May, it had signed an agreement to divest the business for $4.25 billion. As part of its transformation, BAX established its new operating model, integrating the prior matrixed structure of its nine businesses operating across three geographic regions into the aforementioned four verticalized global segments. The company started reporting under a new model, beginning third-quarter 2023.
Revenues from continued operations totaled $3.71 billion in the third quarter, up 3% on a reported basis and 4% organically.
Notable Developments
In June, Baxter Internationalannounced 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.
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 the implementation of value-based procurement initiatives is likely to continue in the country.
Although gross profit improved 1%, operating profit declined 4.9% year over year in the third quarter, reflecting inflationary pressure. Both gross and operating margins contracted during the same time frame.
Estimates Trend
The Zacks Consensus Estimate for 2023 revenues is pegged at $14.75 billion, indicating a 2.4% decline from the previous year’s level. However, revenues are likely to witness an estimated growth rate of 4% in 2024.
The consensus mark for adjusted EPS is pinned at $2.60, indicating a 25.7% decrease from the year-ago reported number. The consensus estimate for adjusted EPS has improved 1.2% in the past 30 days. However, EPS is likely to witness an estimated growth rate of 14.5% in 2024.
DXCM’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 36.43%. The company’s shares have risen 4.2% year to date compared with the industry’s 3.8% growth.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 26.8%. HQY’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 16.5%.
The company’s shares have rallied 15% year to date against the industry’s 9.9% decline.
Biodesix, carrying a Zacks Rank #2 at present, has an estimated growth rate of 32.3% for 2024. BDSX’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 9.76%.
The stock has fallen 30.9% year to date compared with the industry’s 9.9% decline.
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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 lost 28% year to date compared with the industry's 6.3% decline. The S&P 500 Index has increased 16.6% in the same time frame.
BAX, with a market capitalization of $18.61 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 7.1% compared with the industry's (1.8%). It anticipates earnings to improve 5.2% over the next five years.
Image Source: Zacks Investment Research
What's Driving the Performance?
Baxter Internationalended third-quarter 2023 with an improvement in both earnings and revenues. Sales across all product categories were strong except for a decline in the Care & Connectivity Solutions category, led by lower rental revenues and hospital capital spending.
The company expects the demand for its medically essential products to continue amid stabilizing macroeconomic conditions and the 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.
On its third-quarter earnings call, Baxter Internationalannounced that it completed the divestment of its BioPharma Solutions (BPS) business at the end of the third quarter. In May, it had signed an agreement to divest the business for $4.25 billion. As part of its transformation, BAX established its new operating model, integrating the prior matrixed structure of its nine businesses operating across three geographic regions into the aforementioned four verticalized global segments. The company started reporting under a new model, beginning third-quarter 2023.
Revenues from continued operations totaled $3.71 billion in the third quarter, up 3% on a reported basis and 4% organically.
Notable Developments
In June, Baxter Internationalannounced 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.
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 the implementation of value-based procurement initiatives is likely to continue in the country.
Although gross profit improved 1%, operating profit declined 4.9% year over year in the third quarter, reflecting inflationary pressure. Both gross and operating margins contracted during the same time frame.
Estimates Trend
The Zacks Consensus Estimate for 2023 revenues is pegged at $14.75 billion, indicating a 2.4% decline from the previous year’s level. However, revenues are likely to witness an estimated growth rate of 4% in 2024.
The consensus mark for adjusted EPS is pinned at $2.60, indicating a 25.7% decrease from the year-ago reported number. The consensus estimate for adjusted EPS has improved 1.2% in the past 30 days. However, EPS is likely to witness an estimated growth rate of 14.5% in 2024.
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 DexCom (DXCM - Free Report) , HealthEquity, Inc. (HQY - Free Report) and Biodesix (BDSX - Free Report) .
DexCom, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 33.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DXCM’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 36.43%. The company’s shares have risen 4.2% year to date compared with the industry’s 3.8% growth.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 26.8%. HQY’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 16.5%.
The company’s shares have rallied 15% year to date against the industry’s 9.9% decline.
Biodesix, carrying a Zacks Rank #2 at present, has an estimated growth rate of 32.3% for 2024. BDSX’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 9.76%.
The stock has fallen 30.9% year to date compared with the industry’s 9.9% decline.