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What to Expect from Baxter International’s 1Q17 Earnings

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Apr. 25 2017, Updated 8:09 a.m. ET

Analyst estimates

Baxter International (BAX) has exceeded analysts’ earnings estimates for the last few quarters. Baxter International stock is usually impacted when actual results deviate from analyst estimates. In 4Q16, Baxter exceeded analysts’ EPS (earnings per share) estimate of $0.52 and met the revenue estimate of ~$2.7 billion. BAX stock gained around 0.5% after the earnings results announcement on February 1, 2017.

According to analyst estimates, the company’s 1Q17 EPS are expected at ~$0.51. Baxter expects to register adjusted EPS of $0.50–$0.52. Baxter International accounts for ~0.13% of the Vanguard S&P 500 ETF (VOO).

In their most recent quarters, Baxter’s peers Becton Dickinson (BDX), ResMed (RMD), and CR Bard (BCR) are expected to report YoY (year-over-year) rises in EPS of 2.5%, 3.2%, and 12.6%, respectively.

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Profit margin estimates

For 1Q17, Wall Street analysts project that Baxter International’s gross profit margin could rise to $1.1 billion. The estimate represents ~44.2% of its total revenue, which is higher than the company’s margin in the previous quarter.

Baxter’s R&D (research and development) investment is expected to remain flat, whereas its SG&A (selling, general, and administrative) expenses are expected to come down by more than 7%. This is due to the company’s cost reduction initiatives and strategic portfolio optimization.

Earnings drivers

In 2015, Baxter spun off its biosciences division into Baxalta (BXLT) and initiated restructuring of the existing company. The company has registered improving margins since then. However, the revenues have seen a steady performance. Baxter’s strategic product mix and innovation-oriented approach have led to improved earnings for the company. The company’s renal business is expected to be a key growth driver for the company in the medium term.

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