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Here's Why You Should Hold Baxter International (BAX) for Now

Zacks Equity Research

Baxter International Inc. BAX is expected to gain from new developments and strong earnings per share (EPS) view in 2019. However, a lackluster guidance for second-quarter revenues and stiff competition raise concern.

Over the past year, shares of this Zacks Rank #3 (Hold) company have rallied 6.1% compared with the industry’s 5.8% rise. The current level also compares favorably with the S&P 500 index’s 4.9% rise.

What’s Favoring the Stock?

Developments

Baxter recently launched Sharesource 2.0 clinical portal to improve peritoneal dialysis treatment at home. Sharesource 2.0 is a remote patient management platform, providing real-time data which helps take timely treatment decisions. Notably, the Sharesource 2.0 is available on Baxter’s Amia and HomeChoice Claria APD systems across Europe, Canada, Latin America and the United States. (Read More: Baxter's New Sharesource 2.0 to Improve PD Treatment)

Baxter recently announced that it will be commercially launching its patented olive oil-based lipid injectable emulsion, Clinolipid, in the United States later this year. The launch will be a crucial step toward the company’s goal of strengthening its lipid portfolio and offering enhanced health care to malnourished patients.

With these developments, Baxter will be significantly expanding its product base.

EPS View Solid

Baxter recently raised its earnings guidance for 2019. Adjusted earnings per share are anticipated in the band of $3.27-$3.35, up from the previously guided range of $3.22-$3.30.

Notably, major contributions from Renal Care, Medication Delivery Clinical Nutrition and Acute Therapies businesses are expected to drive the company’s bottom line.

Deterrents

Despite bright projections for most of its segments, Baxter expects revenues in the second quarter to decline approximately 2% on a reported basis. However, at constant currency, the metric is expected to grow only 2% year over year.

For investors’ notice, Baxter faces stiff competition in the renal care space. Increase in prevalence of renal diseases and a huge diabetic and obese population is responsible for the growth of renal dialysis market in North America, Europe and Asia Pacific.

Baxter International Inc. Price and Consensus

 

Baxter International Inc. Price and Consensus

Baxter International Inc. price-consensus-chart | Baxter International Inc. Quote

Which Way Are Estimates Headed?

The Zacks Consensus Estimate for second-quarter earnings is pegged at 81 cents, suggesting year-over-year growth of 5.2%. The same for revenues is pinned at $2.79 billion, calling for a fall of 2% year over year.

The Zacks Consensus Estimate for 2019 revenues is at $11.20 billion, indicating a rise of 0.7% year over year. The same for earnings stands at $3.32, calling for growth of 8.9% year over year.

Key Picks

A few better-ranked stocks in the broader medical space are DENTSPLY SIRONA XRAY, Masimo Corporation MASI ad CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY’s long-term earnings growth rate is expected at 11.5%.

Masimo’s long-term earnings growth rate is projected at 16.1%.

CONMED’s long-term earnings growth rate is estimated at 13.3%.

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