Baxter International (BAX) reported a decline of ~1% in revenues during 1Q16. However, the company’s margins improved, due to the lower impact of currency headwinds, better pricing, and a positive sales mix. Also included in the factors is the impact of company’s strategic initiatives to reduce costs, improve efficiencies and thus increase profitability.
Baxter’s adjusted operating margin came to ~10.5% in 1Q16, following cost containment measures and portfolio optimization initiatives. Baxter’s adjusted gross margin for 1Q16 was reported to be around 40.1%, impacted favorably by better pricing, reduced currency headwinds, and a favorable sales mix.
Baxter’s SG&A (selling, general, and administration) expenses fell by 17% of revenue in 1Q16, while its research and development expenses fell by ~2% as a percentage of sales. SG&A expenses also fell due to the lower pension expenses and some income from adjustments related to the Baxalta spinoff.
Revised 2016 financial guidance
Baxter International (BAX) revised its 2016 guidance as the company reported a strong 1Q16. Sales guidance for the year is updated from the 2%–3% range to approximately 3%. On a reported basis, after adjusting for the impact of US cyclophosphamide and the currency headwinds, Baxter expects to realize revenue growth of approximately 1%. This compares to the revenue guidance of an ~1% decline in 2016.
Baxter also revised its EPS (earnings per share) guidance from $1.46–$1.54 to a range of $1.59–$1.67. The company updated its 2016 revenue guidance amid the strong performance observed in almost all the business segments of the company, as well as future growth potential driven by a strong pipeline of products. The company also updated its operating margin guidance from 11% to 11.5%.
Investors can consider ETFs such as the iShares US Healthcare ETF (IYH) IYH holds 0.86%, 1.2%, 0.53%, and 0.6%, respectively, of its portfolio in Baxter and its peers Becton Dickinson (BDX), CR Bard (BCR), and St. Jude Medical (STJ).