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Will Baxter International (BAX) Disappoint in Q4 Earnings?

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Baxter International Inc. (BAX - Free Report) is scheduled to report fourth-quarter 2016 earnings on Feb 1, before the opening bell.

Baxter International’s track record has been quite impressive, with earnings comfortably beating estimates in each of the trailing four quarters. In the last reported quarter, the company recorded a positive earnings surprise of 27.27%, bringing the four-quarter average to 27.02%. Over the past one month, Baxter International returned almost 4.23%, which is higher than the Zacks categorized Medical products sub-industry’s gain of roughly 3.19%. Also, Baxter International has a decent earnings surprise history, as evident from the chart below:



 

Factors at Play

We believe that Baxter’s expanding product pipeline is a key growth catalyst. Newly launched products like SIGMA SPECTRUM infusion pump and AMIA APD cycler with SHARESOURCE two-way connectivity are expected to drive top-line growth in the quarter.

The Renal business is predicted to be a key growth catalyst. Baxter is focused on expanding its end-stage renal disease (ESRD) product portfolio. An aging population, expanded access in emerging markets and growing adoption of home therapies are its main catalysts.

We also anticipate continued robust performance by IV solutions in the quarter. Moreover, the ongoing restructuring program will help in reducing operating expenses. For the fourth quarter of 2016, Baxter expects sales growth of approximately 2%. Adjusted earnings are forecast in the range of 49 cents to 52 cents per share.

Earnings Whispers

Our quantitative model doesn’t point to an earnings beat this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Baxter International is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 52 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Baxter International carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a few companies that you may want to consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Cempra Inc. CEMP has an Earnings ESP of +15.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molina Healthcare Inc. MOH has an Earnings ESP of +5.33% and a Zacks Rank #2.

Universal Health Services, Inc. UHS has an Earnings ESP of +4.97% and a Zacks Rank #2.

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