Baxter International Inc. (BAX) posted nearly 6.0% rise in adjusted net earnings to $720 million or $1.31 per share for the third quarter of 2014 from $681 million or $1.24 per share in the same quarter a year back. With this, earnings per share fell within the company’s previously issued guidance of $1.28 to $1.32 and met the Zacks Consensus Estimate.
Reported net earnings were $468 million or 86 cents in the 2014-third quarter, compared with $544 million or 99 cents in the same quarter of 2013.
Revenues and Margins
Revenues for the quarter went up 13.1% to $4,197 million globally. Excluding the $408 million contribution from Gambro, revenues in the quarter grew 5%.
Revenues within the U.S. escalated 7.3% to $1,755 million while international revenues rose 17.7% (both in reported and constant currency) to $2,442 million in the quarter.
Adjusted gross profit rose 8.4% to $2,119 million but adjusted gross margin fell 20 basis points (bps) to 50.5% in the quarter. Adjusted pre-tax earnings rose 7.7% to $914 million in the quarter.
Segment Results
Revenues from BioScience zoomed 7.5% (both in reported and constant currency) to $1,673 million in the quarter. The increase was attributable to double-digit growth and continued strong demand for the company’s hemophilia therapies, including ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] and FEIBA (an inhibitor therapy), as well as the benefit from government collaborations and the timing of international tenders.
Revenues from Medical Products spiked 17.2% to $2,524 million. The increase was driven by solid sales in the U.S. due to double-digit gains in peritoneal dialysis patients, as well as strong sales of intravenous and nutritional therapies.
Financial Position
Baxter had cash and cash equivalents of $2,078 million as of Sep 30, 2014, down 12.5% from $2,376 million as of Sep 30, 2013. Total debt stood at $9.268 million as of Sep 30, 2014, up 2.2% from $9,066 million as of Sep 30, 2013.
In the first nine months of 2014, Baxter generated cash flow from operations of $6,433 million. which was more than double from $2,660 million in the same period of 2013. Capital expenditures escalated 27.8% to $1,325 million from $1,037 million in the first nine months of 2013.
Outlook
For the fourth quarter of 2014, Baxter expects revenues to grow by 3%, barring the impact of foreign currency. The company also expects adjusted earnings in the range of $1.30 to $1.33 per share for the quarter. The current Zacks Consensus Estimate of $1.33 coincides with the upper-end of the guided range.
For full year 2014, Baxter now expects higher revenue growth of 11 to 12%, up from the prior range of 10 to 11%, excluding the impact of foreign exchange.
However, Baxter lowered its adjusted earnings per share guidance to $4.86 to $4.89 from $5.10 to $5.20. It has kept its operating cash flow guidance intact at $3.5 billion for the year, excluding cash costs related to the spin-off of the biopharmaceutical business. The Zacks Consensus Estimate of $4.88 lies within the guided range.
Zacks Rank
Currently, Baxter retain a Zacks Rank #4 (Sell). Some better-ranked stocks in the medical products industry include GW Pharmaceuticals plc (GWPH), ZELTIQ Aesthetics, Inc. (ZLTQ), and Alere Inc. (ALR). GW Pharmaceuticals and ZELTIQ Aesthetics sport a Zacks Rank #1 (Strong Buy), while Alere carry a Zacks Rank #2 (Buy) at present.
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