Here's Why You Should Hold Onto Baxter (BAX) Stock For Now

By Zacks Investment ResearchStock MarketsMar 18, 2020 09:50PM ET

www.investing.com/analysis/heres-why-you-should-hold-onto-baxter-bax-stock-for-now-200517395

Here's Why You Should Hold Onto Baxter (BAX) Stock For Now

By Zacks Investment Research | Mar 18, 2020 09:50PM ET

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Baxter International, Inc. (NYSE:BAX) is likely to gain from strong fourth-quarter results while its Other unit has been weak of late.

Shares of this company have rallied 9.6% compared with the industry’s 23.6% drop in a year’s time. The current level also compares unfavorably with the S&P 500 index’s 5.2% decline.

This $41.10-billion medical technology company currently has a Zacks Rank #3 (Hold). Baxter’s earnings are expected to grow 11.5% in the next five years. Also, the company has a trailing four-quarter positive earnings surprise of 10.6%, on average.

Let’s take a closer look at the factors that are working in favor of the company right now.

Strong Q4 Show

Baxter came up with fourth-quarter 2019 adjusted earnings per share (EPS) of 97 cents, which surpassed the Zacks Consensus Estimate of 88 cents by 10.2%. The bottom line also improved 36.6% from the year-ago quarter.

Meanwhile, revenues worth $3.04 billion matched the consensus mark and improved 7.3% year over year on a reported basis.

Notably, the strong show was backed by solid growth across the segments -- Renal Care, Medication Delivery, Pharmaceuticals, Clinical Nutrition, Advanced Surgery and Acute Therapies.

Notably, revenues across all segments rose year over year in the quarter.

Reflective of these, Baxter issued a strong guidance for the first quarter of 2020.

The company anticipates sales growth in the range of 4-5% on a reported basis, and 5-6% on both cc and operational basis.

Adjusted EPS are projected in the range of 72-74 cents.

Baxter International Inc. Price and Consensus

Baxter International Inc. Price and Consensus

Baxter International Inc. price-consensus-chart | Baxter International Inc. Quote

Deterrents

In the fourth quarter, Baxter’s Other segment’s revenues fell 4.1% year over year and 3% at cc, reflecting headwinds in contract manufacturing services.

Moreover, owing to the prevailing uncertainty with respect to coronavirus, Baxter is yet to release its 2020 guidance.

Estimates Picture

For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $11.85 billion, indicating an improvement of 4.3% year over year. For adjusted EPS, the same stands at $3.73, suggesting growth of 12.7% from the year-ago reported figure.

Key Picks

Some better-ranked companies in the broader medical sector are Stryker Corp. (NYSE:SYK) , Accuray Inc. (NASDAQ:ARAY) and IDEXX Laboratories, Inc. (NASDAQ:IDXX) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker’s long-term earnings growth is expected at 10.1%.

Accuray’s fiscal fourth-quarter earnings are expected to skyrocket 150%.

IDEXX Laboratories’ first-quarter earnings growth is projected at 6.8%.

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Here's Why You Should Hold Onto Baxter (BAX) Stock For Now

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