Can Core Renal Care Unit Drive Baxter's (BAX) Q1 Earnings?

Baxter International Inc. (NYSE:BAX) is scheduled to report first-quarter 2019 earnings on Jan 31, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 6.9%. Further, it has an average four-quarter positive surprise of 9.1%.

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

Which Way Are Q1 Estimates Treading?

The Zacks Consensus Estimate for first-quarter earnings per share is pegged at 68 cents, suggesting a decline of 2.9% from the year-ago reported figure.

The same for revenues stands at $2.62 billion, indicating a fall of 2.3% from the year-ago quarter.

Renal Care in Focus

Baxter’s Renal Care segment, which offers improved dialysis solutions for patients, is expected to drive first-quarter results.

The company expects to witness growth in this segment in the to-be-reported quarter, backed by consistent rise in global demand for its peritoneal dialysis (PD) products. Further, the company anticipates experiencing growth for PD patients in the United States on the back of rise in patient volumes.

This apart, the company’s successful rollout of Kaguya in Japan is projected to contribute to the unit’s performance on patient growth.

In January, Baxter announced the Sharesource remote patient management that will be available in 40 countries, which is likely to evolve peritoneal dialysis practice management. Enhancements like this might contribute to the segment’s performance in the soon-to-be-reported quarter.

Global demand for continued renal replacement therapies along with continued momentum in PD is expected to drive growth in this segment in the first quarter. Baxter continues to project growth of around 2% to 3% at constant currency in 2019.

Factors to Influence Q1

The company is likely to deliver better-than-expected results in the to-be-reported quarter driven by anticipated solid show across Renal Care, Advanced Surgery and Acute Therapies businesses. Additionally, increased demand for Baxter’s contract manufacturing services might also contribute to the overall performance in the first quarter.

Baxter expects its business lines to grow in line with their respective market growth rates. The company will also benefit from new product launches.

The company is likely to have exhibited global sales growth in the first quarter driven by performance in Renal Care, Clinical Nutrition and Advanced Surgery businesses.

The company expects to witness a sales decline of around 3% on a reported basis in the first quarter. However, it anticipates growth of about 1% on a constant currency basis and an improvement of 1% to 2% on an operational basis which buoys optimism.

Further, the company projects adjusted earnings to range between 66 cents and 68 cents. Prudent execution, robust operational performance and disciplined financial management might have influenced the projection.

However, the lower cyclophosphamide sales might pose threats to the Integrated Pharmacy Solutions franchise business. This apart, sales at pharmaceuticals business is expected to decline 3% to 4% on a constant currency basis. These can impact the company’s overall performance in the to-be-reported quarter.

What Our Quantitative Model Suggests

Per the proven Zacks model, a company with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Baxter has a Zacks Rank #3 and an Earnings ESP of 0.00%, a combination that makes surprise prediction difficult.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks Worth a Look

Here are some stocks worth considering from the same space as these have the right combination of elements to beat on earnings this time around.

Evolus, Inc. (NASDAQ:EOLS) has an Earnings ESP of +24.39% and a Zacks Rank #3.

NanoString Technologies, Inc. (NASDAQ:NSTG) has an Earnings ESP of +3.08% and a Zacks Rank #3.

Perrigo Company plc (NYSE:PRGO) has an Earnings ESP of +3.55% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here .

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