Will Baxter International (BAX) Surprise this Earnings?

Baxter International Inc. (BAX) is slated to report its 2014-second-quarter earnings on Jul 17, before the opening bell. In the previous quarter, Baxter recorded a positive earnings surprise of 8.18%. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

In the last reported quarter, Baxter topped estimates on both fronts. Growth was strongly driven by the Gambro acquisition which strengthened Baxter’s existing line of dialysis products as well as its position in the hemodialysis market. Strong sales of peritoneal dialysis products and certain injectable drugs also led to the improvement in Medical Products revenues.

Baxter continues to benefit from robust growth of ADVATE (Antihemophilic Factor [Recombinant], Plasma/Albumin-Free Method) and FEIBA (an inhibitor therapy) and higher U.S. sales of plasma-based therapeutics.

However, Baxter depends on the EU market for about a third of its revenues. This is a cause for concern given the recent fiscal tightening, a gloomy outlook for hospital spending and tightening of reimbursement. The company also faces pricing pressure due to the advent of group purchasing organizations (GPO.V) in the U.S., which might pressurize the company’s top line to a certain extent.

Earnings Whispers?

Our proven model does not conclusively show that Baxter is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below:

Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.21.

Zacks Rank: Baxter’s Zacks Rank #3 (Hold) when combined with an ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Hospira Inc. (HSP) with an Earnings ESP of +1.79% and a Zacks Rank #1 (Strong Buy).

Wright Medical Group Inc. (WMGI) with an Earnings ESP of +2.22% and a Zacks Rank #1 (Strong Buy).

Cepheid (CPHD) with an Earnings ESP of +30.77% and a Zacks Rank #3 (Hold).

Read the Full Research Report on HSP
Read the Full Research Report on WMGI
Read the Full Research Report on CPHD
Read the Full Research Report on BAX


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