It has been about a month since the last earnings report for Baxter International (BAX). Shares were flat in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent trend continue leading up to its next earnings release, or is Baxter due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Baxter Earnings and Revenues Miss Estimates in Q2
Baxter International Inc. reported second-quarter 2020 adjusted earnings of 64 cents per share, which missed the Zacks Consensus Estimate of 71 cents by 9.9%. Moreover, the bottom line declined 23.8% from the year-ago quarter.
Revenues of $2.72 billion lagged the Zacks Consensus Estimate of $2.87 billion by 5.2%. The top line decreased 4.1% year over year on a reported basis, while 1% and 2% on a constant currency (cc) and operational basis, respectively.
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 reported revenues of $1.41 billion, down 7.4% on a year-over-year basis and 5% at cc.
In EMEA, revenues totaled $731 million, down 1.5% from the year-ago quarter but up 1% at cc.
In APAC, revenues of $580 million improved 1.2% from the prior-year quarter and 5% at cc.
This segment reported revenues of $919 million in the quarter under review, up 1.3% year over year. Revenues at the segment increased 5% at cc.
Revenues at the segment amounted to $612 million, down 11.2% from the year-ago quarter and 9% at cc.
Revenues at the segment totaled $485 million, down 9.9% from the year-ago quarter and 7% at cc.
Revenues at the segment were $219 million, up 1.9% from the year-ago quarter and 5% at cc.
Revenues at the segment totaled $168 million, down 27.3% from the year-ago quarter and 27% at cc.
This segment reported revenues of $186 million, up 40.9% from the prior-year quarter and 45% at cc.
Revenues in the segment were $129 million, up 5.7% on a year-over-year basis and 7% at cc.
Baxter reported gross profit of $1.04 billion in the second quarter, down 9.9% year over year. As a percentage of revenues, gross margin contracted 250 bps on a year-over-year basis at 38.2% in the second quarter.
Operating income fell 5.4% year over year to $331 million in the quarter under review. As a percentage of revenues, operating margin contracted 20 bps to 12.2% in the quarter under review.
For full-year 2020, Baxter anticipates sales growth between (1%) and 1% on a reported basis. On both constant currency and operational basis, sales growth is expected to be flat to up low-single digits.
Adjusted earnings per share is estimated in the range of $3-$3.10.
It is important to mention here that the aforementioned outlook takes into account, among other factors, a sequential improvement on a quarterly basis in both hospital admissions and surgical volumes although still below year-ago period levels.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -11.12% due to these changes.
At this time, Baxter has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Baxter has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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