BAXTER INTERNATIONAL INC $76 - New York symbol BAX

BAXTER INTERNATIONAL INC. $76 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 542.6 million; Market cap: $41.2 billion; Price-to-sales ratio: 2.7; Dividend yield: 2.7%; TSINetwork Rating: Average; www.baxter.com) recently announced that it will split into two separate companies.

One firm will focus on medical devices, such as intravenous pumps and kidney dialysis equipment. This business currently provides 60% of Baxter’s revenue. The other company will make biopharmaceuticals, including vaccines and hemophilia drugs.

In mid-2015, Baxter will hand out shares in the biopharmaceutical firm to its investors as a tax-deferred dividend.

Meanwhile, Baxter earned $692 million, or $1.26 a share, in the three months ended June 30, 2014. That’s up 5.0% from $659 million, or $1.20 a share, a year earlier.

Revenue rose 16.2%, to $4.3 billion from $3.7 billion. If you exclude the contribution of dialysis equipment maker Gambro, which Baxter bought for $3.9 billion in September 2013, revenue rose 5%.

The stock has gained 14% since Baxter announced the spinoff in March 2014. It now trades at 14.7 times the company’s likely 2014 earnings of $5.16 a share. That’s an attractive p/e ratio for a market leader that spends around 7% of its revenue on research. The $2.08 dividend yields 2.7%.

Baxter is a buy.

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