Goldman Sachs maintains Buy on Baxter (BAX)
Thursday, January 26, 2022 11:51 AM

Goldman Sachs has maintained its Buy rating on Baxter (BAX) shares and retained the price target after the company reported fourth quarter results in line with expectations.

The brokerage views fourth quarter results as positive given the strong results in the underlying business, especially with US IVIG sales of $290 million that came in 9 percent more than Goldman Sachs’s projection. Sales of Recombinant to the tune of $578 million were also more than 2 percent of its expectations.

Earlier in the day, Baxter reported adjusted earnings of $1.17 per share for the fourth quarter, which was in line Goldman Sachs as well as Street consensus estimation. Revenue also came in line with estimate. Increased gross margin by 50 basis points and a lower share count by 1 cent were offset by increased spending towards selling, general and administrative besides R&D.

For the year 2012, Baxter issued earnings outlook of $4.47 - $4.57 a share compared to Goldman Sachs’ estimation of $4.59 a share and the Street consensus of $4.60 a share. Revenue is projected to grow in the range of 4-5 percent constant currency translating into sales growth of 2 percent. The company’s first quarter earnings guidance of $0.98 - $1.00 per share is below Goldman Sachs estimation of $1.04 a share and consensus prediction of $1.05 a share.

The brokerage believes that the midpoint of Baxter’s 2012 revenue outlook implies organic growth of about 3 percent after adjusting for the Baxa and Synovis acquisitions and currency. Analyst David Roman cautioned investors on concerns over guidance as it comes on the back of increased investor interest in the stock.

Still, Goldman Sachs view 2012 EPS outlook as likely good enough given reduced expectations heading into fourth quarter results. Other than the Alzheimer’s opportunity, the brokerage continue to view Baxter as transforming into a new product story with several products having the potential to drive sales upside above the peer group.