On Dec 30, we issued an updated research report on Deerfield, IL-based Baxter International Inc. BAX, a global medical technology company and leading provider of renal and hospital products.
Over the past six months, Baxter outperformed the broader market in terms of price movement. Additionally, a solid estimate revision trend for the next year instills confidence in the stock. The stock currently carries a Zacks Rank #3 (Hold).
Year to date, the stock has added 16%, way better than the S&P 500’s 7.8% in the same time frame. A glimpse on the price performance of the stock reveals a negative return of 2.6% over the past six months, compared with the Zacks classified Medical Product sub-industry’s loss of almost 7.4%.
Delving deeper, the estimate revision trend for the next year remains solid for the stock, with two estimates moving upward in the last two months, compared to one estimate going down over the last month.
Notably, the Zacks Consensus Estimate for the next year has improved by a penny to $2.12, over the past two months. On the flip side, for the current year, one estimate moved south compared to no movements in the opposite direction over the same time frame.
We are particularly upbeat on Baxter’s positive guidance. Based on the company’s strong performance in the first three quarters of the year, the company raised its outlook for the full-year sales, which is expected to increase approximately 2% on a reported basis and 4% at constant currency (cc). In fact for the fourth quarter of 2016, Baxter expects sales growth at both reported and cc of approximately 2%.
Recently, Baxter has signed a definitive agreement to acquire Claris Lifesciences Limited’s subsidiary, Claris Injectables Limited, for $625 million. Post the deal closure, Baxter will leverage on Claris’ expertise in the production of essential generic injectable medicines.
Although Baxter operates in the life-sustaining and critical care products category that is relatively cushioned against economic downturns, we believe cut-throat competition in the medical products segment and unimpressive hospital spending environment are major concerns.
Moreover, lower cyclophosphamide sales pose threats to the Integrated Pharmacy Solutions franchise business of Baxter. For the coming quarter, lower cyclophosphamide sales are expected to impact the top line by low single digits.
Other Key Picks
Better-ranked medical stocks are NxStage Medical Inc. NXTM, Align Technology, Inc. ALGN and Haemonetics Corporation HAE. NxStage Medical and Align Technology sport a Zacks Rank #1 (Strong Buy), while Haemonetics carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.