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Baxter (BAX) Hits 52-Week High: What's Aiding the Stock?

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Shares of Baxter International Inc. BAX scaled a new 52-week high of $89.70 on Feb 9 before closing the session marginally lower at $89.45.

Over the past year, this Zacks Rank #2 (Buy) stock has gained 14.9% against 17.9% fall of the industry. The S&P 500 composite rose 15.5% in the same time frame.

Over the past five years, the company registered earnings growth of 2.4% compared with the industry’s 7.1% rise. The company’s long-term expected growth rate of 9.5% compares with the industry’s growth projection of 16.9%. Baxter has delivered an earnings surprise of 10.2% for the past four quarters, on average.

Zacks Investment Research
Zacks Investment Research

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Baxter is witnessing an upward trend in its stock price, prompted by its strong product portfolio. A robust third-quarter 2021 performance, along with the company’s strength in the renal care space, is expected to contribute further. However, generic competition for cyclophosphamide and a sluggish macroeconomic environment are worrying.

Let’s delve deeper.

Key Growth Drivers

Strength in Renal-Care Space: We are optimistic about Baxter’s provision of hemodialysis and peritoneal dialysis (“PD”), as well as new therapies like expanded hemodialysis and remote patient management, which have fortified the company’s position in the renal care space. Renal care products include AMIA Automated PD System with SHARESOURCE Remote Patient Management System, SHARESOURCE Remote Patient Management System, BICART Cartridge and Cartridge Blood Set, among others. Baxter continues to experience robust growth in global demand for CRRT therapies despite the ongoing COVID-19 pandemic.

Strong Product Portfolio: We are upbeat about Baxter’s impressive product portfolio with improved existing products and new product development. Management has announced plans of introducing new therapies and products, which are expected to further contribute to sales, by 2023. Baxter’s product pipeline comprises the addition of generic injectables and the next generation of its premix technology, among other notable mentions.

Strong Q3 Results: Baxter’s solid third-quarter 2021 results buoy optimism. The company witnessed strong performance across all of its business units. Growth in Americas, EMEA and APAC is encouraging. Expansion in both gross and operating margins fuels further optimism. Regulatory approvals, product launches and buyouts are primary highlights.

Downsides

Sluggish Macroeconomic Environment: Baxter depends on the European Union for about a third of its sales. This is a cause for concern, given the sluggish macroeconomic environment, a glum outlook for hospital spending and tightening of reimbursement. The outlook also remains slightly uneasy in the United States, where demand for many healthcare products is soft, with an expectation of further price cuts on account of healthcare reforms.

Generic Competition for Cyclophosphamide: Cyclophosphamide is a part of Baxter's Hospital Products segment. However, Baxter’s cyclophosphamide performance over the last five years has lacked luster for the most part. Lower cyclophosphamide sales pose a threat to the Integrated Pharmacy Solutions franchise business. Despite a promising portfolio, the company has failed to grab significant market share and substantially grow its top line, thanks to generic competition in the cyclophosphamide space.

Key Picks

A few stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, Allscripts Healthcare Solutions, Inc. MDRX and Henry Schein, Inc. HSIC.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 19.5%. It currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMN Healthcare has gained 36.1% against the industry’s 59.9% fall over the past year.

Allscripts, carrying a Zacks Rank #2, has an estimated long-term growth rate of 11.1%. MDRX’s earnings surpassed estimates in the trailing four quarters, the average surprise being 34.1%.

Allscripts has gained 25.2% against the industry’s 55.7% fall over the past year.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.9%. It currently carries a Zacks Rank #2.

Henry Schein has gained 9.9% compared with the industry’s 7% rise over the past year.


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Allscripts Healthcare Solutions, Inc. (MDRX) : Free Stock Analysis Report

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