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Baxter International Inc. (BAX - Free Report) reported second-quarter 2018 adjusted earnings per share of 77 cents, which beat the Zacks Consensus Estimate by 8.5% and improved from the year-ago quarter’s 63 cents.
In the last four quarters, the company delivered positive earnings surprises, the average being 10.1%.
Baxter posted sales of $2.84 billion, in line with the Zacks Consensus Estimate. At constant currency (cc), revenues rose 5%. The figure increased 9.1% year over year on a reported basis. Per management, increased sales of injectable pharmaceuticals, strength in the company’s renal care and acute therapies businesses were the major growth drivers.
This Zacks Rank #3 (Hold) company’s shares have rallied roughly 25% in a year’s time, while the industry has gained 14%.
Geographical Details
Baxter reports operating results through three geographic segments: Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).
In Americas, Baxter recorded sales of $1.53 billion, up 6.4% on a year-over-year basis and 5% at cc.
In EMEA, sales totaled $758 million, up 13.8% from the year-ago quarter and 3% at cc.
In APAC, sales of $559 million rose 10.5% from the prior-year quarter and 4% at cc.
Baxter International Inc. Price, Consensus and EPS Surprise
This segment recorded sales of $931 million in the reported quarter, up 9% year over year. Sales at the segment increased 4% at cc.
Medication Delivery
Sales at the segment grossed $681 million, slightly down from the year-ago quarter’s $681 million. Sales at the segment inched down 2% at cc.
Pharmaceuticals
Sales in the segment were $537 million, which shot up 19.3% from the year-ago quarter and 16% at cc.
Clinical Nutrition
Sales in the segment were $221 million, up 2.3% from the year-ago quarter’s tally. However, at cc, revenues fell 3%.
Advanced Surgery
Sales in the segment were $204 million, up 14.6% from the year-ago quarter and 12% at cc.
Acute Therapies
Sales in the segment were $129 million, up 15.2% from the prior-year quarter and 10% at cc.
Other
Sales in the segment were $139 million, up 24.1% on a year-over-year basis. At cc, revenues increased an impressive 20% in the quarter.
Margin Analysis
Baxter registered gross profit of $1.29 billion in the second quarter, up 9.6% year over year. As a percentage of revenues, adjusted gross margin expanded 20 basis points (bps) to 45.5% in the second quarter.
Adjusted operating income increased 8% year over year to $487 million in the quarter. As a percentage of revenues, operating margin expanded 70 bps to 17.1% in second-quarter of 2018.
Guidance
Buoyed by solid second-quarter performance, Baxter raised its 2018 outlook.
For 2018, the company expects adjusted earnings within $2.94 to $3 per share. Notably, the Zacks Consensus Estimate for earnings is pegged at $2.89, which is below the guided range.
Revenues are expected to grow 6% on a year-over-year basis and 5% at cc. The Zacks Consensus Estimate for revenues stands at $11.35 billion.
For the third quarter of 2018, the company expects sales growth of approximately 3% year over year and 3-4% at cc. The Zacks Consensus Estimate is pinned at $2.86 billion.
Earnings per share is expected between 72-74 cents. The Zacks Consensus Estimate stands at 73 cents, within the projected range.
In Conclusion
Baxter ended the second quarter on a solid note. The company continues to gain from its core Renal Care segment. The expansion of medication delivery portfolio with two new innovative drug infusion pumps buoys optimism. Regulatory approvals for the company’s Spectrum IQ Infusion System with Dose IQ Safety Software are also worth a mention. The CE mark for Evo IQ Infusion System in the United Kingdom and surge in international sales are positives. Moreover, expansion in the company’s gross and operating margin is encouraging. A solid outlook for 2018 and 2020 paints a bright picture.
On the flip side, the company continues to witness headwinds related to generic competition for U.S. cyclophosphamide. The slowing down of the Medication Delivery segment is discouraging. A series of acquisitions may pose integration risks for the company. Baxter operates in a highly competitive environment which adds to the woes.
Key Picks
A few better-ranked stocks in the broader medical space are Masimo Corporation (MASI - Free Report) , DaVita Inc. (DVA - Free Report) and Integer Holdings Corp (ITGR - Free Report) .
Integer Holdings is slated to release second-quarter 2018 results on Aug 2. The Zacks Consensus Estimate for adjusted bottom line is 90 cents and the same for the top line is pinned at $381.8 million. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Masimo is scheduled to release second-quarter 2018 results on Aug 1. The Zacks Consensus Estimate for adjusted earnings per share stands at 72 cents, while the same for revenues is pinned at $208 million. The stock carries Zacks Rank #2 (Buy).
DaVita is slated for earnings release on Aug 1. The Zacks Consensus Estimate for adjusted earnings per share stands at 97 cents, while the same for revenues is pinned at $2.88 billion. The stock carries Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Baxter (BAX) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
Baxter International Inc. (BAX - Free Report) reported second-quarter 2018 adjusted earnings per share of 77 cents, which beat the Zacks Consensus Estimate by 8.5% and improved from the year-ago quarter’s 63 cents.
In the last four quarters, the company delivered positive earnings surprises, the average being 10.1%.
Baxter posted sales of $2.84 billion, in line with the Zacks Consensus Estimate. At constant currency (cc), revenues rose 5%. The figure increased 9.1% year over year on a reported basis. Per management, increased sales of injectable pharmaceuticals, strength in the company’s renal care and acute therapies businesses were the major growth drivers.
This Zacks Rank #3 (Hold) company’s shares have rallied roughly 25% in a year’s time, while the industry has gained 14%.
Geographical Details
Baxter reports operating results through three geographic segments: Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific).
In Americas, Baxter recorded sales of $1.53 billion, up 6.4% on a year-over-year basis and 5% at cc.
In EMEA, sales totaled $758 million, up 13.8% from the year-ago quarter and 3% at cc.
In APAC, sales of $559 million rose 10.5% from the prior-year quarter and 4% at cc.
Baxter International Inc. Price, Consensus and EPS Surprise
Baxter International Inc. Price, Consensus and EPS Surprise | Baxter International Inc. Quote
Segmental Details
Renal Care
This segment recorded sales of $931 million in the reported quarter, up 9% year over year. Sales at the segment increased 4% at cc.
Medication Delivery
Sales at the segment grossed $681 million, slightly down from the year-ago quarter’s $681 million. Sales at the segment inched down 2% at cc.
Pharmaceuticals
Sales in the segment were $537 million, which shot up 19.3% from the year-ago quarter and 16% at cc.
Clinical Nutrition
Sales in the segment were $221 million, up 2.3% from the year-ago quarter’s tally. However, at cc, revenues fell 3%.
Advanced Surgery
Sales in the segment were $204 million, up 14.6% from the year-ago quarter and 12% at cc.
Acute Therapies
Sales in the segment were $129 million, up 15.2% from the prior-year quarter and 10% at cc.
Other
Sales in the segment were $139 million, up 24.1% on a year-over-year basis. At cc, revenues increased an impressive 20% in the quarter.
Margin Analysis
Baxter registered gross profit of $1.29 billion in the second quarter, up 9.6% year over year. As a percentage of revenues, adjusted gross margin expanded 20 basis points (bps) to 45.5% in the second quarter.
Adjusted operating income increased 8% year over year to $487 million in the quarter. As a percentage of revenues, operating margin expanded 70 bps to 17.1% in second-quarter of 2018.
Guidance
Buoyed by solid second-quarter performance, Baxter raised its 2018 outlook.
For 2018, the company expects adjusted earnings within $2.94 to $3 per share. Notably, the Zacks Consensus Estimate for earnings is pegged at $2.89, which is below the guided range.
Revenues are expected to grow 6% on a year-over-year basis and 5% at cc. The Zacks Consensus Estimate for revenues stands at $11.35 billion.
For the third quarter of 2018, the company expects sales growth of approximately 3% year over year and 3-4% at cc. The Zacks Consensus Estimate is pinned at $2.86 billion.
Earnings per share is expected between 72-74 cents. The Zacks Consensus Estimate stands at 73 cents, within the projected range.
In Conclusion
Baxter ended the second quarter on a solid note. The company continues to gain from its core Renal Care segment. The expansion of medication delivery portfolio with two new innovative drug infusion pumps buoys optimism. Regulatory approvals for the company’s Spectrum IQ Infusion System with Dose IQ Safety Software are also worth a mention. The CE mark for Evo IQ Infusion System in the United Kingdom and surge in international sales are positives. Moreover, expansion in the company’s gross and operating margin is encouraging. A solid outlook for 2018 and 2020 paints a bright picture.
On the flip side, the company continues to witness headwinds related to generic competition for U.S. cyclophosphamide. The slowing down of the Medication Delivery segment is discouraging. A series of acquisitions may pose integration risks for the company. Baxter operates in a highly competitive environment which adds to the woes.
Key Picks
A few better-ranked stocks in the broader medical space are Masimo Corporation (MASI - Free Report) , DaVita Inc. (DVA - Free Report) and Integer Holdings Corp (ITGR - Free Report) .
Integer Holdings is slated to release second-quarter 2018 results on Aug 2. The Zacks Consensus Estimate for adjusted bottom line is 90 cents and the same for the top line is pinned at $381.8 million. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Masimo is scheduled to release second-quarter 2018 results on Aug 1. The Zacks Consensus Estimate for adjusted earnings per share stands at 72 cents, while the same for revenues is pinned at $208 million. The stock carries Zacks Rank #2 (Buy).
DaVita is slated for earnings release on Aug 1. The Zacks Consensus Estimate for adjusted earnings per share stands at 97 cents, while the same for revenues is pinned at $2.88 billion. The stock carries Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>