UPDATE: Baxter 1Q Net Climbs 20%; Co. Sees Plasma Stability
April 16 2009 - 11:24AM
Dow Jones News
Baxter International Inc. (BAX) posted a 20% jump in
first-quarter net income with help from a business for blood
plasma-based products, easing concerns about too much supply and
falling prices.
A charge last year linked to a problem device also helped
earnings, which rose more than Wall Street analysts expected
despite slightly weaker-than-anticipated sales. Solid performance
in Baxter's high-margin BioScience unit, which includes plasma
products, helped.
Donated plasma, the liquid component of blood, is refined to
make products that treat problems such as immune-system disorders.
While Baxter is shielded from major economic strains by the
severity of the diseases its products treat, the company has
recently faced another more unique recession-related worry: that
people will donate more plasma to collect the typical $25 to $35
payment, boosting supplies and putting downward pressure on plasma
prices.
Baxter executives sought to assuage such concerns on Thursday,
however, by saying it's been business as usual in a market where
supply constraints and growing demand can be bigger concerns.
Collections were actually down slightly from the fourth
quarter.
"We continue to grow our collections in line with market
growth," said Robert L. Parkinson, Jr., Baxter's chief executive,
on a conference call with analysts. He added that Baxter still sees
an opportunity for price increases in coming years.
Thursday's report helped Baxter's shares, which recently traded
up 4.3% to $51.35. Still, the company's stock price remains down
more than 12% over the last two months due to plasma concerns and a
general drop in health stocks triggered by health-care reform
worries.
Analysts thought Baxter's results looked good in light of recent
concerns. "The fact that they're getting price increases in that
market shows that clearly there's not an oversupply," said Edward
Jones analyst Aaron Vaughn, referring to the plasma market.
Leerink Swann's Rick Wise said Bioscience sales, which rose 3%,
or 11% excluding the impact of unfavorable currency rates, were
"in-line" and "seem to confirm no major near-term shift in market
dynamics."
Baxter's first-quarter net income rose to $518 million, or 83
cents a share, from $432 million, or 67 cents a share, a year
earlier. The year-ago period included a 7-cent charge for
long-running problems related to infusion pumps.
Earnings topped the company's projected range, given in January,
and the average 81-cent target among analysts surveyed by Thomson
Reuters.
Following a pattern set by other big medical companies that have
reported this week, Baxter turned in solid earnings despite sales,
which slipped 2% to $2.82 billion, that fell short of Wall Street
forecasts. Foreign currency rates played a big role, as Baxter said
sales were up 6% excluding this impact, slightly below its forecast
for a 7% gain.
Gross margin rose to 52.7% from 48%, helping the earnings
performance.
Within the BioScience business, which also includes products to
treat hemophilia and trauma victims, domestic sales were up 14%.
Plasma-protein sales grew by 5%, or 17% excluding currency.
Sales in the Medication Delivery business, which makes
anesthesia, intravenous therapies and other products, sank 3%,
while sales in the Renal business, which provides dialysis
treatments for kidney failure, fell 8%. Sales were up in both
cases, though, when the currency effect is taken out.
Looking ahead, Baxter raised the low end of its 2009 earnings
outlook by 2 cents, putting the range at $3.72 to $3.78 a share. It
also reiterated its sales outlook.
For the second quarter, the company forecast earnings of 93
cents to 95 cents on sales that are expected to be dragged lower by
currency, but rise 7% excluding that factor.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
(Mike Barris contributed to this report.)