Baxter International Inc. BAX is scheduled to release first-quarter 2023 results on Apr 27, before the opening bell. In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 6.38%. BAX’s earnings missed estimates in two of the trailing four quarters, met once and beat in the other, the average surprise being 2.18%.
Currently, the consensus estimate for first-quarter revenues is pegged at $3.6 billion, indicating a decline of 3% from the prior-year period. The same for earnings stands at 48 cents per share, indicating a 48.4% decline from the year-ago quarter.
Factors to Note
For first-quarter 2023, Baxter expects sales to decline 3% on a reported basis and 1% at constant currency basis. For the same period, adjusted earnings per share is expected between 46 cents and 50 cents. Earnings outlook for the quarter reflects inflationary pressure, rising interest expense and higher tax rate.
Robust demand for Baxter’s broad multi-chamber product offering is likely to have continued in the first quarter, driving sales of its Clinical Nutrition segment. Moreover, a continued rise in surgical volume and elective surgical procedures might have fueled strong growth in Advanced Surgery’s sales.
The Zacks Consensus Estimate for Clinical Nutrition and Advanced Surgery’s first-quarter sales is pegged at $223 million and $228 million, respectively.
However, Renal Care segment sales declined in each of the quarters of 2022 and the trend is likely to have continued in the quarter to be reported. Strong growth in Baxter’s PD business and IV therapy portfolio is expected to have been more than offset by lower in-center HD sales, lower infusion system sales and unfavorable currency movement. The Zacks Consensus Estimate for the segment’s sales is pegged at $865 million.
The company has multiple collaborations to help manufacture COVID-19 vaccines. However, sales growth of the BioPharma Solutions segment is likely to have been hurt by challenging year-over-year comparisons, resulting from prior-year COVID-related sales.
Sales at Acute Therapies segment are also likely to have experienced a similar impact in the soon-to-be-reported quarter. The Zacks Consensus Estimate for BioPharma Solutions and Acute Therapies’ sales is pegged at $136 million and $178 million, respectively.
Baxter International Inc. Price and EPS Surprise
Sales of the Pharmaceutical segment are expected to have been hurt by generic competition for certain molecules and supply constraints that impacted product availability. The consensus estimate for the segment’s sales is pinned at $508 million.
In the fourth quarter of 2022, all of Baxter’s global regions performed weakly due to unfavorable currency movements. In the Americas, BAX reported revenues of $1.7 billion, down 1% from the prior-year quarter. In EMEA, revenues totaled $750 million, down 8% from the year-ago quarter. In APAC, revenues of $668 million were down 9% year over year. The trend is likely to have continued in the quarter under review.
Meanwhile, three new product categories added with the Hillrom buyout in December 2021 generated $734 million in the fourth quarter. These products are likely to have brought additional sales during the first quarter.
Continued demand for the physical assessment and cardiology portfolios within the Front Line Care business might have driven Hillrom’s first-quarter sales. Meanwhile, inflationary pressure, and freight and supply chain constraints are likely to have increased cost of goods, hurting gross margin.
BAX is focused on debt repayment, which will likely drive its expenses during 2023. This might also reflect in the company’s first-quarter results.
Baxter has proposed the spin-off of its Kidney Care company — including Renal Care and Acute Therapies businesses — earlier this year. It expects to complete the spin-off this year, which may extend to 2024.
Baxter is also pursuing strategic alternatives for its BioPharma Solutions business. Investors may ask questions related to the proposed spin-off during the company’s first-quarter earnings call. BAX may provide an update related to its progress with strategic alternatives for BioPharma Solutions business.
What Our Quantitative Model Suggests
Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see below.
Earnings ESP: Baxter has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #3.
Stocks to Consider
Here are a few medical stocks worth considering as these have the right combination of elements to come up with an earnings beat this reporting cycle:
Henry Schein HSIC has an Earnings ESP of +0.99% and a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
HSIC has an estimated long-term growth rate of 8.1%. Henry Schein’s earnings surpassed estimates in three of the trailing four quarters and met once, the average surprise being 2.97%.
BioRad Laboratories BIO has an Earnings ESP of +0.16% and a Zacks Rank of 2 at present. BIO has an earnings yield of 3.3%, which compares favorably with the industry’s negative yield of 2.9%.
BioRad Laboratories’ earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 27.54%.
McKesson MCK has an Earnings ESP of +1.22% and a Zacks Rank #3 at present. MCK has an estimated long-term growth rate of 10.4%.
McKesson’s earnings surpassed estimates in two of the trailing four quarters and missed the mark in the other two, the average surprise being 3.42%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.