Baxter Beats Again -- the Streak Is Alive!

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Maybe Wall Street is getting too accustomed to Baxter International (NYSE: BAX) beating consensus earnings estimates.

The last time Baxter merely matched the consensus forecast was the third quarter of 2004. The last time it missed was the third quarter of 2003 -- by a penny. On Thursday, its earnings per share of $0.98, excluding one-time events, topped the average Wall Street third-quarter estimate by a penny, and beat last year's number by $0.10.

However, the medical conglomerate's stock was hit hard -- down 4.4% -- as revenue was flat versus the year-ago quarter. Third-quarter revenue of $3.14 billion lagged the consensus forecast estimate of $3.19 billion. Without the impact of foreign currency, Baxter's sales would have been up 6%.

More salesmanship needed
Given the market's reaction, it looks like Baxter and its well-diversified peers, Johnson & Johnson (NYSE: JNJ) and Abbott Labs (NYSE: ABT), will have to show finicky analysts that they can raise revenue even when adverse foreign currency exchange rates affect top-line results from their far-flung empires.

On Tuesday, J&J reported earnings per share of $1.20, beating Wall Street's forecast by $0.07. Similar to Baxter, the stock skidded because revenue was lower than the year-ago quarter and under Wall Street's expectations.

On Wednesday, Abbott fared better. Its stock price actually rose after the company reported earnings per share of $0.92, excluding special items, or $0.02 better than the average analyst forecast. Maybe that's because this company actually gave Wall Street what it wanted on the revenue side, growing it over the year-ago quarter.

Buy and grow
Earlier this year, Baxter expressed an interest in strategic acquisitions, but it has only pulled the trigger on one deal, which it described as "immaterial" to this year's results.

By contrast, Johnson & Johnson has purchased stakes in Elan (NYSE: ELN) and Crucell (Nasdaq: CRXL), as well as all of Cougar Biotechnology and breast-implant company Mentor.

Abbott Labs has been actively acquiring, including the recent agreement for the drug division of Belgium's drug-and-chemical conglomerate Solvay as well as purchases of the eye-care companies Advanced Medical Optics and Visiogen.

So how does Baxter convince investors, let alone Wall Street analysts, it can still outperform both J&J and Abbott, as well as an index of Big Pharma companies, as it has over the past five years?

Well, when it reported yesterday, it offered its trademark steady growth forecast -- fourth-quarter earnings per share will be $1.02 to $1.04, excluding special items, which is in line with analysts' forecasts. Excluding foreign exchange, revenue should grow 6% to 8%.

Baxter may not provide a jolt to your portfolio, but it will be a key nutritional supplement.

One Fool thinks Baxter might qualify as America's next top growth stock. To read why, click here.