With a market capitalization of approximately $39.5 billion, Baxter International Inc. BAX is expected to benefit from positive tidings on regulatory front, expanding product portfolio, strategic collaborations and strong presence in the international markets. However, foreign currency headwinds, generic competition for Cyclophosphamide and lackluster sales growth projections in a few sub-segments are key concerns.

Here we take a quick look at the primary factors that have been plaguing Baxter and discuss the prospects that ensure near-term recovery of the stock.

What’s Plaguing Baxter?

Branded drug Cyclophosphamide is a part of Baxter’s Hospital Products segment and faces generic competition. Performance of the product has been dismal in the past five years.

Lower cyclophosphamide sales pose threats to the Integrated Pharmacy Solutions franchise business. However, management expects 2018 U.S. cyclophosphamide sales of $130 million, slightly above the previous guidance of $120 million.

As a result of these headwinds, Baxter underperformed the industry in a year’s time. The company’s shares returned 19.6%, lower than the industry’s rise of roughly 21.6%.

 

 

Why Should you Still Hold?

Baxter has been witnessing positive tidings on the regulatory front.

In July, management announced the FDA clearance and Health Canada approval of the Spectrum IQ Infusion System with Dose IQ Safety Software. The Spectrum IQ is the first-of-its-kind system designed specifically for bi-directional electronic medical records (EMR) integration.

Furthermore, in August, the company received CE mark for the Evo IQ Infusion System in the United Kingdom and Ireland, representing the first in a series of planned regulatory submissions for the Evo IQ system.

Regulatory approvals will help the company fortify foothold in various geographic locations, which will enhance the customer base.

Which Way are the Estimates Treading?

For the current quarter, the Zacks Consensus Estimate for earnings is pegged at 74 cents per share, reflecting growth of 15.6% on a year-over-year basis. The same for the revenues is pegged at $2.79 billion, reflecting an increase of 2.9% year over year.

For 2018, the Zacks Consensus Estimate for revenues is pegged at $11.2 billion, reflecting growth of 6.1%. The same for adjusted earnings for 2018 is pegged at $2.98, reflecting an increase of 20.2%.

For the third quarter of 2018, the company expects sales growth of approximately 3% year over year and 3-4% at contstant currency (cc). Earnings per share (EPS) is expected between 72 cents and 74 cents. For 2018, Baxter expects adjusted EPS between $2.94 and $3. Revenues are expected to grow 6% on a year-over-year basis and 5% at cc.

The stock has a Zacks Rank #3 (Hold).

Baxter International Inc. Price and Consensus

 

Baxter International Inc. Price and Consensus | Baxter International Inc. Quote

Want More From the Industry?

A few better-ranked stocks in the MedTech space are Penumbra, Inc PEN, Integer Holdings Corporation ITGR and Illumina, Inc ILMN. All the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Penumbra has a long-term expected earnings growth rate of 20%, while the same for Integer Holdings and Illumina is pegged at 15% and 22.1%, respectively.

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