U.S. Markets closed

Baxter (BAX) Down 1.5% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Baxter International (BAX). Shares have lost about 1.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Baxter due for a breakout? 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 catalysts.

Baxter Q1 Earnings and Revenues Surpass Estimates

Baxter International Inc. reported first-quarter 2019 adjusted earnings of 76 cents per share, which surpassed the Zacks Consensus Estimate of 68 cents by 11.8%. The bottom line also improved 8.6% from the year-ago quarter.

Revenues of $2.63 billion outpaced the Zacks Consensus Estimate of $2.62 billion. The top line declined 1.7% year over year on a reported basis but increased 2% on operational basis.

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 revenues of $1.41 billion, down 2.4% on a year-over-year basis and 1% at constant currency (cc).

In EMEA, revenues totaled $705 million, down 2.6% from the year-ago quarter but up 4% at cc.

In APAC, revenues of $519 million increased 1.6% from the prior-year quarter and 7% at cc.

Segmental Details

Renal Care

This segment reported revenues of $851 million in the quarter under review, down 1.9% year over year. Revenues at the segment increased 3% at cc.

Medication Delivery

Revenues at the segment grossed $634 million, down 6.2% from the year-ago quarter and 4% at cc.

Pharmaceuticals

Revenues at the segment amounted to $509 million, up 2.6% from the year-ago quarter and 6% at cc.

Clinical Nutrition

Revenues at the segment were $205 million, down 8.1% from the year-ago quarter and 5% at cc.

Advanced Surgery

Revenues at the segment totaled $198 million, up 8.8% from the year-ago quarter and 12% at cc.

Acute Therapies

This segment reported revenues of $128 million, down 0.8% from the prior-year quarter but increased 4% at cc.

Other

Revenues in the segment grossed $107 million, up 3.9% on a year-over-year basis and 8% at cc.

Margin Analysis

Baxter registered adjusted gross profit of $1.15 billion in the first quarter, down 1.8% year over year. As a percentage of revenues, gross margin contracted 10 bps on a year-over-year basis at 43.7% in the first quarter.

Operating income decreased 11.1% year over year to $384 million in the quarter under review. As a percentage of revenues, operating margin expanded 40 bps to 17.1% in first-quarter 2019.

Guidance

On the basis of the strong performance in the first quarter, Baxter raised earnings guidance for 2019.

Adjusted earnings are anticipated to be in the band of $3.27-$3.35 per share, up from the previously guided range of $3.22-$3.30 per share. The Zacks Consensus Estimate for earnings stands at $3.27, within the company’s guided range.

The company expects sales growth in the range of 0-1% on a reported basis, 2-3% at cc and 3-4% on an operational basis.

For the second quarter of 2019, management at Baxter expects revenues to decline approximately 2% on a reported basis, up approximately 2% at cc and improve in the range of 2-3% on an operational basis. Adjusted earnings are projected to be in the range of 80-82 cents per diluted share. The Zacks Consensus Estimate is pegged at 81 cents, which lies above the guided range.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

At this time, Baxter has an average Growth Score of C, a grade with the same score on the momentum front. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Baxter has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Baxter International Inc. (BAX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.