Is Baxter International (BAX) Poised to Beat Earnings in Q3?
Baxter International Inc. (BAX) is slated to report third-quarter 2014 results before the opening bell on Oct 16. In the last reported quarter, Baxter recorded a positive earnings surprise of 4.13%. Let’s see how things are shaping up for this announcement.
Factors to Consider
In the last reported quarter, Baxter topped estimates on both fronts and exceeded its previously issued earnings guidance. Strong growth across all global franchises boosted revenues at the BioScience segment while Medical Products revenues were driven by robust sales of peritoneal dialysis products, injectable drugs, anesthetics and nutritional therapies. However, despite a strong quarter, Baxter narrowed its 2014 adjusted earnings per share guidance to $5.10 to $5.20 from the earlier band of $5.05 and $5.25.
Baxter has recently been seeking expansion via acquisitions, strategic collaborations and impressive product lineup. Baxter’s acquisition of privately-held Gambro AB in 2013 has strengthened its role in the hemodialysis market. Apart from Gambro, Baxter recently acquired gene therapy-mediated cures developer Chatham Therapeutics, LLC and privately-owned AesRx, LLC which are expected to boost its Medical Products segment results further.
Baxter’s exclusive distribution agreement with MI-based Rockwell Medical, Inc. to commercialize the latter’s hemodialysis concentrate product line and its collaboration with MA-based Merrimack Pharmaceuticals, Inc. for the development and commercialization of MM-398 are also worth noting. Through both internal development and collaborations, Baxter is also greatly focusing on research and development (R&D) activities to advance its product pipeline.
However, Baxter faces margin pressures primarily owing to integration-related costs and promotional end-market initiatives for new product launches. Baxter depends on the EU for about a third of its sales. This is a cause for concern given the recent fiscal tightening, tapering of reimbursement and a gloomy outlook for hospital spending.
Earnings Whispers
Our proven model does not conclusively show that Baxter is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP is currently pegged at 0.76% as the Most Accurate estimate of $1.32 is above the Zacks Consensus Estimate of $1.31.
Zacks Rank: Baxter currently holds a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Abaxis, Inc. (ABAX) with an earnings ESP of 4.55% and a Zacks Rank #2 (Buy).
Heartware International Inc. (HTWR) with an earnings ESP of 21.21% and a Zacks Rank #3 (Hold).
Hospira Inc. (HSP) with an earnings ESP of 9.43% and a Zacks Rank #3 (Hold).
Read the Full Research Report on HSP
Read the Full Research Report on BAX
Read the Full Research Report on ABAX
Read the Full Research Report on HTWR
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