Baxter International (BAX) Q3 Earnings: Beat In The Cards?

Baxter International Inc. (NYSE:BAX) is scheduled to report third-quarter 2016 earnings on Oct 25. Last quarter, Baxter reported earnings of 46 cents per share, which beat the Zacks Consensus Estimate of 39 cents by 17.95%.

Notably, the company’s earnings topped the Zacks Consensus Estimate in the last four quarters, by an average of 30.55%.

Let’s see how things are shaping up prior to this quarter.

Why a Likely Positive Surprise?

Our proven model shows that Baxter is likely to beat on earnings because it has the right combination of the two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +2.27%. A favorable Zacks ESP serves as a meaningful indicator of a likely positive earnings surprise.

Zacks Rank: Baxter has a Zacks Rank #3 (Hold) which increases the possibility of an earnings beat. Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings.

Conversely, sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

Factors at Play

We believe that Baxter’s expanding product pipeline is a key growth catalyst. Newly launched products like SIGMA SPECTRUM infusion pump and AMIA APD cycler with SHARESOURCE two-way connectivity are expected to drive top-line growth in the quarter.

The Renal business is predicted to be a pivotal growth driver. Baxter is focused on expanding its end-stage renal disease (ESRD) product portfolio. An aging population, expanded access in emerging markets and growing adoption of home therapies are its main catalysts.

We also anticipate continued robust performance by IV solutions in the quarter. Moreover, the ongoing restructuring program will help in reducing operating expenses.

For the third quarter of 2016, Baxter expects sales growth in the range of 3% to 4%. Adjusted earnings are forecast in the range of 43 cents to 45 cents per share.

Other Stocks to Consider

Here are a few other stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:

WellCare Health Plans (NYSE:WCG) with an Earnings ESP of +3.60% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) with an Earnings ESP of +12.50% and a Zacks Rank #2.

Ascendis Pharma (NASDAQ:ASND) with an Earnings ESP of +10.13% and a Zacks Rank #3.

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