Sunday, November 6, 2011

Baxter International Q3 Results: Beat Estimates

For the Q3 Baxter International (BAX) recorded total revenue of $3.4 billion (up 8%). The total revenue was comprised of domestic revenue totaling at $1.4 billion (up 1%) and overseas revenue at $2 Billion (up 13%). BAX’s increase in total revenue for Q3 was driven by oversea sales, resulting in an overall EPS of $1.09 surpassing LY Q3 EPS of $1.01. These results matched BAX’s earlier estimations of Q3 EPS between $1.07-1.09.

BAX also reported net income of $578 million ($1.01 per share) for Q3 versus the $525 million ($.89 per share) in 2010. This continuation of revenue growth can be directly correlated to the success from the performance of their different subdivisions. On a segment basis, Bioscience revenues amounted to $1.5 billion (up 9% from Q3 2010) due to higher demand for Gammagard Liquid. Recombinants were recorded at $552 million (up 5%), Plasma Proteins at $372 million (up 8%), and Antibody Therapy at $380 million (up 13%). Medical Product sales were at $1.9 Billion (up 7%) due to growth in intravenous therapies and injectable drugs, anesthesia products in overseas markets, and peritoneal dialysis therapy while Renal was $646 million (up 2%), IV Therapies $453 million (up 3%), and Global Injectables at $494 million (same). However, even with these growths gross margin was recorded at $1.7 Billion (50.9%), down from 51.5%, displaying a .6% decrease. Decrease to gross margin was largely due to R&D spending accelerated by 15%. In addition, cash flow from operations also fell recorded at $922 million versus the $1 billion totaled during the previous quarter.

Moreover, Baxter had many positive announcements from the Q3. Baxter came to a definitive agreement to acquire Baxa Corporation for $380 million (Baxa is a privately held company that develops automated pharmacy compounding technologies that enhances the efficacy and safety of oral and IV dose preparation and delivery). Furthermore, they received FDA approval for GAMMAGARD LIQUID 10% SubQ and recently launched the therapy in the United States and reached Phase III trials in treatments for multifocal motor neuropathy and Alzheimer's disease. More importantly, Baxter is the only company with approval for the MMN (multifocal motor neuropathy) indication in Europe, and have also been granted Orphan Drug status for the therapy in the US. Furthermore, management repurchased nearly 6 million shares of common stock for $292 million. These are just some of the positive news Baxter released on Thursday.
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For the fourth quarter, Baxter expects earnings per diluted share of $1.15 to $1.18 and sales growth, excluding the impact of foreign currency, of 2% to 3%. They expect reported sales to increase in the 1% to 2% range. $60 million related to the U.S. multi-source Generic Injectables business versus approximately $200 million in 2010. Management now forecasts annual earnings at $4.29 to $4.32 per diluted share, which is at the high end of their previous guidance range of $4.27 to $4.32 per diluted share. Annual gross margins for the company are projected to be 51% to 51.5%. Expect the full year average share count of approximately 575 million shares, which assumes approximately $1 billion in net share repurchases. Overall, another solid quarter of earnings for BAX.

Shawn Laljit- Junior Analyst
Deven Gould- Healthcare Sector Head

1 comment:

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