Baxter International (BAX – Analyst Report) engages in the worldwide development, manufacture and distribution of a diversified line of products, systems and services used primarily in the health-care field. The company provides a portfolio of hospital and renal products that service to treat end-stage renal disease, irreversible kidney failure, and acute kidney therapies. The company’s products are used by hospitals, clinical and medical research laboratories, blood and dialysis centers, rehabilitation centers, nursing homes, doctors’ offices and by patients, at home, under physician supervision.
Baxter has posted positive earnings and has seen rising estimate revisions, which has helped the stock rise 18% higher year to date. The Deerfield, IL based company recently became a Zack Rank #1 (Strong Buy) making the stock the Bull of the Day.
Baxter has a market cap of $25 Billion with a Forward PE of 27. The company pays a dividend yield of 1.16% and has an expected 3-5 year EPS growth rate of 8.65%. Over the last two years the stock has outperformed the S&P 500 by returning almost 17% versus 6%. Most of this return has been in 2016, a time when most stocks are struggling to move higher. This outperformance in such a dull market says a lot about the strength of the stock and future price direction if equities were to finally breakout.
Baxter reported Q1 earnings on April 26th seeing $0.36 versus $0.29 expected. Revenue came in at $2.4 Billion verse the $2.34 Billion expected and the company guided Q2 $0.38-0.40 versus the $0.35 expected. Baxter also raised fiscal year 2016 to $1.59-1.67 verse the $1.50 expected.
CEO Jose Almeida had some comments on the quarter: “Our new strategic framework focused on portfolio optimization, operational excellence and capital allocation is driving improved performance throughout the organization and is reflected in our increased financial outlook for the year.”
While the news wasn’t enough to push the stock much higher following earnings, the stock is up almost 5% since last quarter’s report. The company’s next report will be August 3rd, and earnings revisions are looking positive.
Earnings estimate revisions for both fiscal year 2016 and 2017 are headed higher, suggesting the stocks earnings momentum will continue. Over the last 60 days, Baxter has seen at least six analysts give upward revisions for the current quarter, next quarter, current year and next year.
For fiscal year 2016, estimates over have gone from $1.50 to $1.63 over the last 60 days, a bump of 8.6%. For the same time period, fiscal year 2017 has seen a 7.9% jump, from $1.76 to $1.90. If Baxter surprises to the upside on these numbers, look for the stock to continue the upward momentum it has seen so far in 2016.
Baxter has a strong history of surprising to the upside. Since 2012 the company has never missed, so look for another beat on August 3rd. More important than an EPS beat is stock direction after earnings. The last three beats have caused the stock to head higher, a good sign that investors are following the fundamentals.
News out yesterday gave the stock a positive bump in early trading. A study conducted by Baxter indicates healthcare systems in the United Kingdom, Germany, Italy and Spain see value in supporting remote monitoring technology for chronic health conditions, including end-stage renal disease (ESRD). The study indicated that remote monitoring may improve access to care, decrease hospitalizations and reduce treatment costs by helping healthcare professionals manage patient’s treatments and improve adherence.
Baxter allows investors exposure into the medical products space with consistent earnings momentum. Considering the stock’s recent strength Baxter looks to be a good investment for the rest of 2016 if stocks break out to all time highs.
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