BAXTER INTERNATIONAL INC. $67 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 542.0 million; Market cap: $36.3 billion; Price-to-sales ratio: 2.5; Dividend yield: 2.9%; TSINetwork Rating: Average; www.baxter.com) continues to expand overseas, which helps cut its exposure to the 2.3% excise tax it must pay on sales of medical devices as part of the Affordable Care Act (or Obamacare). In 2012, overseas markets supplied 58% of Baxter’s revenue.
The company recently completed its $3.7-billion purchase of Gambro AB, a Swedish dialysis-product maker. Gambro looks like a nice fit with Baxter’s intravenous pumps and other medical equipment. This division supplies 55% of its total revenue. The remaining 45% comes from its BioScience division, which produces vaccines and drugs.
In the three months ended September 30, 2013, Baxter’s revenue rose 8.5%, to $3.8 billion from $3.5 billion a year earlier. Gambro supplied $100 million of that total, which helped push up the medical products division’s sales by 10.2%. BioScience revenue rose 6.4% on strong demand for the division’s Advate hemophilia drug.
Without acquisition-related costs and other unusual items, Baxter would have earned $655 million, or $1.19 a share, in the latest quarter. That’s up 4.3% from $628 million, or $1.14 a share.
The company spent $290 million (or 7.7% of its revenue) on research in the latest quarter, unchanged from $290 million (or 8.3% of revenue) a year earlier. Baxter recently teamed up with another firm to develop certain products, which lowered its research costs.
Even so, the company continues to develop innovative products. For example, it recently launched its new HyQvia immunodeficiency treatment in Germany. HyQvia uses regular needles to deliver medication, instead of more-invasive intravenous pumps. Baxter hopes to soon start selling HyQvia in the U.S.
Baxter should earn $4.66 a share in 2013, and the stock trades at 14.4 times that forecast.
In 2014, the company’s earnings could rise 10.5%, to $5.15 a share, and the stock trades at just 13.0 times that estimate. The $1.96 dividend yields 2.9%.
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