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Baxter International’s Financial Performance

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Top line

Baxter International (BAX) generated net sales of $2.7 billion in the first quarter of 2018 compared to $2.5 billion in Q1 2017. Its cost of sales increased from $1.4 billion in Q1 2017 to $1.6 billion in Q1 2018. Baxter’s gross margins were affected by a negative impact from foreign exchange rates and the impact of lost sales due to Hurricane Maria and incremental supply chain costs in the first quarter.

The company’s gross profit increased marginally from $1 billion in Q1 2017 to $1.1 billion in Q1 2018.

Operating expenses

Baxter’s marketing and administrative expenses increased from $564 million in Q1 2017 to $622 million in Q1 2018. Its research and development expenses increased from $127 million in Q1 2017 to $140 million in Q1 2018. The increase was due to the timing of certain project-related expenditures and the impact of foreign exchange rates. Baxter expects an increase in project-related expenditures in the second quarter as well.

Baxter generated operating income of $432 million in the first quarter compared to $353 million in Q1 2017.

Bottom line

Net interest expenses incurred by Baxter International declined marginally from $14 million in Q1 2017 to $12 million in Q1 2018. In Q1 2017, Baxter incurred other expense of $11 million, whereas in Q1 2018, it earned other income of $18 million. The change was primarily attributable to a net pension benefit of $12 million in the first quarter of 2018 compared to $9 million in Q1 2017.

As a result of the increase in revenues, Baxter’s net income increased from $272 million in Q1 2017 to $389 million in Q1 2018. That translates to net income per share of $0.71 in Q1 2018 compared to $0.49 in Q1 2017.

Baxter announced a higher cash dividend for 1Q18 at $0.16 compared to $0.13 in Q1 2017.

In the next part of this series, we’ll take a look at Baxter International’s cash flow trends and stock repurchases.

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