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Can International Sales Drive Baxter's (BAX) Q2 Earnings?

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Baxter International Inc. (BAX - Free Report) is scheduled to report second-quarter 2018 earnings on Jul 26, before the market opens.

We expect the company to see steady growth on the back of its international ventures. While this can majorly drive second-quarter results, a raised guidance and strategic collaborations are other tailwinds.

In the last reported quarter, Baxter posted adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9% and improved from the year-ago quarter’s 58 cents.

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $2.85 billion, reflecting a year-over-year rise of 9.2%. The Zacks Consensus Estimate for adjusted earnings per share is pegged at 71 cents, indicating an increase of 12.7%.

Strong International Presence Likely to Drive Results

Baxter has a strong presence in foreign markets which helps the company gain traction.

In the last reported quarter, the company’s international sales accounted for an impressive 46.3% of total revenues.

Baxter’s advanced surgery team recently launched TISSEEL Prima in Europe. Furthermore, in Japan, the company’s renal care team launched the KAGUYA peritoneal dialysis technology.

In the last reported quarter, Baxter saw higher volumes of shipments of IV solutions from Mexico to the United States. The company looks forward to reallocating additional IV solutions from select South America manufacturing facilities. Per management, this will help revamp production processes at manufacturing facilities in both the United States and Puerto Rico.

Other Factors at Play

Raised Guidance

Baxter has raised its guidance for 2018.

The company expects sales growth of 5% at constant currency (cc). It projects adjusted earnings per share from continuing operations in the range of $2.85-$2.93 for the full year. The Zacks Consensus Estimate is pegged at $2.89, within the guided range.

For the second quarter of 2018, the company expects sales growth of approximately 5% at cc. Baxter expects adjusted earnings from continuing operations of 69-71 cents. The Zacks Consensus Estimate is pinned at 71 cents, at the high end of the guided range.

Strategic Buyouts

Baxter has been banking on strategic acquisitions and collaborations to enhance its existing product portfolio.

Recently, Baxter completed the acquisition of RECOTHROM and PREVELEAK from Mallinckrodt, with a view to boost its surgical portfolio of hemostats and sealants. Notably, the company bought RECOTHROM Thrombin topical and PREVELEAK Surgical Sealant product lines from Mallinckrodt.

Though the buyout did not prove accretive in the last reported quarter, management expects the deal to be modestly rewarding in 2018.

From the acquisition of Claris Injectables Limited, Baxter expects revenues worth $145 million in 2018.

Lately, Baxter announced a partnership with International Society of Nephrology (ISN) to spread awareness on chronic kidney disease awareness and its therapy in emerging markets. This reflects Baxter’s focus on specializing in renal care.

Cyclophosphamide Competition

Cyclophosphamide is part of Baxter's Hospital Products segment, which has been underperforming over the last five years. For 2018, Baxter expects U.S. cyclophosphamide sales of around $120 million, up from the previous guidance of $95 million. However, the guided figure is much lower than $185 million in 2017.

What Our Model Predicts

Our quantitative model does not predict an earnings beat for Baxter this quarter.

This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. This has been illustrated below:

Earnings ESP:  Baxter has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Baxter carries a Zacks Rank #2.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Varian Medical (VAR - Free Report) has an Earnings ESP of +1.08%. The stock carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

McKesson Corporation (MCK - Free Report) has an Earnings ESP of +3.95%. The stock carries a Zacks Rank #3.

Becton, Dickinson and Company (BDX - Free Report) has an Earnings ESP of +2.02%. The stock carries a Zacks Rank #3.

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