Baxter International Inc. (NYSE:BAX) has been on a healthy growth trajectory of late. Strategic acquisitions, product developments and a bullish outlook have been providing the company with competitive edge in MedTech. With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick at the moment.
In the past six months, shares of Baxter have grown 9.7% compared with the industry’s 7.9% increase. The current level is also higher than the S&P 500 index’s rise of 1.7%.
The stock has a market cap of $38.49 billion. The company’s next five-year earnings growth rate is also favorable at 13.4% compared with the industry’s 12.8% rally.
The company delivered a positive earnings surprise of 10.3% over the last four quarters. Also, it has a long-term expected earnings growth rate of 12.5%.
Baxter has an impressive Growth Score of A as well. Our Growth Style Score highlights all the vital metrics of a company’s financials to obtain a clearer picture of the quality and sustainability of its growth. Our research shows that stocks with Style Scores of A or B when combined with a solid Zacks Rank #1 (Strong Buy), 2 or 3 (Hold), offer the best investment opportunities.
Let’s find out whether the recent positive trend is a sustainable one.
Solid Earnings
Baxter ended the first quarter on a solid note, beating the consensus mark for earnings and revenues. Adjusted earnings came in at 70 cents per share, up from 58 cents in the prior-year quarter.
Revenues were $2.68 billion, up 4% year over year at constant currency (cc). Geographically, US sales inched up 2% year over year to $1.1 billion. Meanwhile, international sales increased 3% to $1.5 billion year over year.
The company delivered strong results on the back of a solid performance by the core Renaland Pharmaceutical businesses. While Renal unit sales increased 4% on a year-over-year basis, Pharmaceutical sales rose 13%.
Raised Guidance
Buoyed by solid first-quarter earnings results, Baxter lifted its financial outlook for 2018. For the second quarter of 2018, the company expects sales growth of approximately 5% at cc. The company expects adjusted earnings from continuing operations in the band of 69-71 cents.
It also projects 5% sales growth at cc. It anticipates adjusted earnings per share from continuing operations in the range of $2.85-$2.93 for the full year.
Strategic Acquisitions
Strategic buyouts have been long helping Baxter gain market traction. Recently, the company completed the consolidation of RECOTHROM Thrombin topical and PREVELEAK Surgical Sealant product lines from Mallinckrodt (NYSE:MNK). The deal is expected to widen Baxter’s surgical portfolio of hemostats and sealants. Although the transaction has not been accretive to first-quarter earnings, the company still estimates it to be so in 2018.
The buyout of India-based Claris Injectables Limited has provided Baxter with a robust portfolio of generic injectables with 11 molecules, currently approved in the United States.
Upward Estimate Revision Trend
The company’s estimate revision trend for the current year has been positive. In the past couple of months, 11 analysts moved north with none in the opposite direction. Earnings estimates have been raised around 3.9% to $2.89 during the same time frame.
Other Key Picks
Other top-ranked stocks in the broader medical sector include Intuitive Surgical (NASDAQ:ISRG) , Illumina, Inc (NASDAQ:ILMN) and Amedisys, Inc. (NASDAQ:AMED) . While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Amedisys carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical has an expected long-term earnings growth rate of 12.1%.
Illumina expects long-term earnings growth of 20%.
Amedisys projects long-term earnings growth of 17.5%.
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