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Mrinalini Chaudhuri
Mrinalini Chaudhuri
Articles (517) 

Baxter Going Strong

Baxter reported secong quarter with revenue exceeding expectations

August 30, 2016 | About:

Baxter International (NYSE:BAX) has been in the business of saving and sustaining lives for more than 80 years. Patients and providers rely on Baxter for lifesaving renal and medical products, including intravenous (IV) solutions, systems and administrative sets, IV infusion parenteral nutrition, perioperative care, pharmacy devices and software, acute renal care and home and in-center dialysis. The company’s global footprint and the critical nature of its products and services play a key role in expanding access to healthcare in emerging and developed countries.

The company reported a strong second quarter. The company exceeded revenue expectations and the EPS is also in line. The second quarter results are a reflection of the company’s commitment to deliver industry leading performances.

As per CFO Jay Saccaro, pursuant to the successful disposition of the retained equity stake in Baxalta (NYSE:BXLT), the company has been able to pursue with investments in both organic and inorganic growth initiatives. He reiterated that this has also helped in returning value to shareholders through dividends and stock repurchases.

Second Quarter Results

The company’s second quarter worldwide sales totalled at $2.6 billion, which marked an increase of 4% on a reported basis and 6% on a constant currency basis as compared to the prior-year quarter.

During the quarter, Baxter reported income from continuing operations of $1.2 billion, or $2.19 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis.

On an adjusted basis, excluding special items, Baxter’s second quarter income from continuing operations totalled $256 million, or 46 cents per diluted share, exceeding the company’s previously-issued guidance of 38 to 40 cents per diluted share.

Hospital Products sales during the quarter were $1.6 billion, which marked an increase of 6% on a reported basis and 7% on a constant currency basis.

Baxter’s Renal sales totalled $965 million, which marked an increase of 2% on a reported basis, and a 4% increase on a constant currency basis.

During the second quarter, Baxter also completed the disposition of its retained stake in Baxalta, which included an equity contribution of approximately $700 million to the company’s U.S. pension plan. It also included completion of an equity-for-equity share exchange which resulted in a reduction of Baxter’s outstanding share count of approximately 11 million. (Source: Company’s website)

Dividend

On July 19, the company declared a quarterly dividend of 13 cents per Baxter common share. This cash dividend is payable on Oct. 3 to shareholders of record as of Sept. 2.

Expectations for 2016

 

Range

Reported sales growth

To be around 1%-2%

Sales on a constant currency basis

To range between 3%-4%

Earnings from continuing operations

To range between $1.69-$1.74

Better Future

Strong operational performance across Baxter’s portfolio contributed to growth in the second quarter. The company has a disciplined approach in returning value to shareholders, both in long term and in short term. It has a strong pipeline of innovative products to offer to the public. It is relentlessly managing its cost structure to support successful innovation of products and is designing its annual capex in a way to support its bottom-line growth.

It has also targeted an annual dividend payout ratio of approximately 35% of adjusted net income. I think that in this medical products industry, the company is doing well with solid earnings and is upgrading its guidance. It has planned to roll out more than 50 products over the next five years in areas of chronic and acute renal care, smart pump technology, hospital pharmaceuticals and nutritionals, surgical sealants and more.

Focus

  • Strategy to drive industry-leading performance
  • Disciplined focus on portfolio management
  • Innovation
  • Operational excellence
  • Capital allocation
  • Portfolio optimization

Global Presence

  • In North America, Baxter has diverse facilities in the United States including its headquarters located in Deerfield, Illinois, approximately 30 miles north of Chicago. Baxter’s presence in Canada includes commercial and compounding pharmacy operations and manufacturing.
  • Baxter has a significant presence in Europe, the Middle East and Africa, with commercial, manufacturing and research facilities in more than a dozen countries.
  • Baxter’s Latin America region includes manufacturing and distribution as well as renal care facilities in several countries.
  • Baxter has had a significant presence in Asia-Pacific for more than 40 years.

Conclusion

Innovation and quality are central to Baxter’s success. The company is a leader in the research, development and manufacture of lifesaving intravenous and dialysis devices and solutions, drug delivery systems, pharmacy automation and other technologies essential to patient care worldwide. Baxter is uniquely positioned to enhance providers’ delivery of quality care in the hospital, home and renal care clinics. Baxter’s extensive global reach helps the company play a significant role in driving access to cost-effective care.

The company is directing its strategies and investments that will accelerate its performance as a medical technology leader. The company is rallying forward with continued momentum. I am bullish about this company since it boasts of solid earnings and updated its outlook. I think adding this company will reap shareholder returns.

Disclosure: I do not hold any position in the company.

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