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Baxter (BAX) to Report Q2 Earnings: What's in the Offing?

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Baxter International Inc. (BAX - Free Report) is scheduled to report second-quarter 2019 results on Jul 25, before markets open. While core units Renal Care and Pharmaceuticals are likely to disappoint, a few collaborations inked recently are expected to compensate for it. However, a mixed view for the quarter is concerning.

In the last reported quarter, the company’s earnings were in-line with the Zacks Consensus Estimate. Further, the average for the trailing four quarters is a positive 0.1%.

Where Do Estimates Stand?

The Zacks Consensus Estimate for second-quarter earnings per share is pegged at 81 cents, suggesting 5.2% growth from the year-ago reported figure.

The same for revenues stands at $2.79 billion, indicating a decline of 1.9% from the year-ago quarter.

Baxter International Inc. Price and EPS Surprise


Baxter International Inc. Price and EPS Surprise

Baxter International Inc. price-eps-surprise | Baxter International Inc. Quote

Let’s delve deeper.

Factors to Influence Q2

It is encouraging to note that in recent times, a few strategic alliances signed by Baxter are likely to reflect on second-quarter results.

For instance, the company along with NantHealth announced that a digital health solution is now available to connect Prismaflex with EMR (Electronic Medical Record) systems. This is likely to enhance Baxter’s digital care portfolio. Additionally, a new collaboration with bioMérieux is focused on developing biomarkers for prompt identification and treatment of acute kidney injury. (Read More: Baxter's New Tie Up to Boost Acute Therapies Business)

This is expected to boost the company’s core Acute Therapies business. The Zacks Consensus Estimate for the segment’s second-quarter revenues stands at $134 million, calling for 3.9% growth year over year. Per management, product launches and continued focus on geographic expansion are likely to work in favor of the unit.

Additionally, growing demand for Baxter’s Spectrum IQ and Evo IQ infusion pumps is likely to show on second-quarter results.

On the flip side, headwinds related to Baxter’s U.S. business and exit of the in-center hemo dialysis Bloodline business are likely to hurt the core Renal Care arm.  In fact, management expects the business’ exit to negatively impact Baxter’s Renal Care sales in 2019 by approximately $55 million. Notably, the Zacks Consensus Estimate for the segment’s second-quarter revenues is pegged at $914 million, suggesting a decline of 1.8% year over year.

This apart, Baxter’s Pharmaceutical business faces increasing generic competition for cyclophosphamide and Brevibloc. The Zacks Consensus Estimate for the segment’s second-quarter revenues is pinned at $515 million, indicating a drop of 4.1% from the year-ago quarter. In fact, in 2019, sales at the segment are expected to see a decline of low-single digits on a constant currency (cc) basis.

Reflective of these, Baxter issued a mixed view for the quarter to be reported.

The company expects second-quarter revenue decline of 2% on a reported basis and growth of 2% at cc. Adjusted earnings per share are expected between 80 cents and 82 cents.

What Our Quantitative Model Suggests

Per the proven Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Baxter has a Zacks Rank #3 and an Earnings ESP of 0.00%, a combination that makes surprise prediction difficult.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

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.

AmerisourceBergen (ABC - Free Report) has an Earnings ESP of +0.82% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DENTSPLY SIRONA (XRAY - Free Report) has an Earnings ESP of +6.95% and a Zacks Rank #1.

Amedisys, Inc. (AMED - Free Report) has an Earnings ESP of +1.91% and a Zacks Rank #1.

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