(BAX) Baxter International Downgraded to Neutral

February 5th, 2010

We recently downgraded Baxter International Inc. (BAX) to Neutral. The stock was assigned a target price of $59 based on an approximate P/E multiple of 13.9x our fiscal 2010 earnings estimate of $4.25.

Baxter recently reported fourth quarter and fiscal 2009 results. For the fourth quarter, earnings per share were $1.03, in line with the Zacks Consensus Estimate and higher than the year-ago earnings of 91 cents. For full fiscal 2009, earnings per share were $3.80, again in line with the Zacks Consensus Estimate and higher than the year-ago earnings of $3.38.

Earnings Estimate Revision Trend and Zacks Rank

The earnings estimate revision for Baxter has demonstrated a down trend in the past 30 days. During the period, seven out of eleven analysts downgraded their earnings estimates while only two have upgraded theirs for the first quarter of fiscal 2010. Seven out of twelve analysts have downgraded their earnings estimates while two have upgraded theirs for the second quarter of fiscal 2010.

For fiscal 2010, twelve out of fifteen analysts have downgraded their earnings estimates while two have upgraded their earnings estimates. For fiscal 2011, two out of twelve analysts have downgraded their earnings estimates while three have upgraded their earnings estimates.

The downward trend in the earnings estimate justifies the present Zacks Rank # 3 that typifies a ‘Neutral’ recommendation for the stock.

Excluding the reported quarter, Baxter has witnessed earnings surprises in three out of the preceding four quarters with the four-quarter average being 2.23%. In the fourth and third quarter of fiscal 2009, Baxter beat the Zacks Consensus Estimate by 0% and 2.08%, respectively.

Baxter is a leading global medical products and services company that develops, manufactures and markets products to treat hemophilia, kidney disease, infectious diseases, etc. Baxter’s main competitors include Becton, Dickinson and Company (BDX) and Johnson & Johnson (JNJ).

Zacks Investment Research

More on this topic (What's this?)
A Short Story: Baxter International (Bullish Bankers, 2/9/10)
Flu Stocks in Focus as Orders, Approvals Stack Up (tickerspy.com, 10/7/09)
Added and Updated Valuations – 9/14/09 (ModernGraham.com, 9/14/09)
Safety Last? (Financial Armageddon, 3/30/10)
Read more on Baxter International at Wikinvest

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