Goldman Sachs Raises Price Target on Baxter (BAX)
Thursday, January 26, 2022 7:51 PM

Goldman Sachs raised its price target on Baxter (BAX) shares to $63 from $58 based on price earning ratio, DCF and the NPV of the company obtaining an Alzheimer’s indication.

The brokerage revised its 2012 estimated EPS for higher revenue, a greater than expected unfavorable currency impact and weak gross margins following the company’s fourth quarter results. This reduces EPS projection by 9 cents to $4.50 from $4.59. However, analyst David Roman raises his estimates to represent normalization of non-operating items unfavorably impacting 2012, higher revenues and a lower tax rate. This leaves the analyst to project estimated revenue and earnings growth of 5.5 percent and 11.0 percent respectively for the period 2012 – 2015.

Goldman Sachs has maintained Buy rating on BAX and views 2012 outlook as a clearing event. The long-term outlook is very much intact and the financial impact of a 1.5 percent reduction in guidance is immaterial.

The brokerage continues to view Baxter as having the most attractive growth profile in large cap medical technology. Goldman Sachs also believes that a series of new product launches in the second half of 2012 to 2015 would drive the company’s organic growth rate to 5 percent – 6 percent in 2013 from 3 percent. A reasonable bull case would put revenue in the more than 7 percent range.

At current levels, BAX is trading in line with the peers. But once, pipeline evidence emerges and new products take stage, the brokerage expects the P/E to multiple to expand.

Goldman Sachs lists deterioration of IVIG business, share loss in infusion pumps, increased competition in Recombinants and further quality control costs as key risks.