3 Top Stocks to Watch on Earnings: Baxter International, Novartis and UnitedHealth Group

Today's top stories in biotech and health care.

Jul 17, 2014 at 8:45AM


Let's take a look at today's top stories in biotech and health care. Keep an eye out for Baxter International (NYSE:BAX), Novartis (NYSE:NVS), and UnitedHealth Group (NYSE:UNH)

Baxter beats on earnings and revenues
Baxter posted second quarter earnings before the bell this morning, beating consensus for both earnings per share and revenues. Adjusted earnings per share came in at $1.26 compared to consensus of $1.22. Sales for the quarter were $4.3 billion, beating the Street's expectations by $280 million.

Digging into the details, a fair amount of this beat can be attributed to strong domestic growth, with U.S. sales increasing by 12% to $1.7 billion, compared to the same period a year ago. 

Turning to the specifics, Baxter saw stellar year over year growth in its medical products business, with sales of $2.5 billion for the quarter--a stately 24% increase. As expected, the bulk of this growth came from Gambro and its product portfolio. Of particular note, Baxter saw strong sales of its injectable drugs, anesthetics and nutritional therapies, and peritoneal dialysis products. Baxter also reported double-digit sales growth of its hemophilia A therapy Advate, producing the majority the 7% increase in BioScience sales for the quarter.  

On the back of this strong earnings report, the company now expects full year sales to grow by 10% to 11%. Wall Street previously had full year sales growth coming in at around 8% to 9%, so this is certainly a welcome surprise for investors. 

Novartis has a disappointing quarter
Novartis posted second quarter earnings per share this morning of $1.34, missing the Street's estimates by $0.03. The company also missed estimates on revenue by a noteworthy $180 million, posting $14.6 billion in sales for the quarter or 2% growth compared to the same period a year ago. Novartis' management attributed its weak pharma sales to price cuts in Japan and falling sales of its blood pressure medication, Diovan, due to the introduction of generic competition. 

Looking ahead, Novartis confirmed its 2014 outlook despite the uncertainty surrounding its ongoing restructuring process. As a reminder, the company recently swapped its vaccine unit for GlaxoSmithKline's cancer portfolio and sold off its animal health unit as well. That being said, Novartis does have some compelling new drugs coming on-line like its late-state lung cancer drug Zykadia that could help to generate top-line growth in subsequent quarters. 

UnitedHealth posts strong second quarter earnings
UnitedHealth Group's management has been blaming Obamacare for its lackluster performance so far this year, but after this quarter, they may have to change their tune. For the second quarter, UnitedHealth Group posted earnings per share of $1.42, beating consensus handsomely by $0.16. or 12.6%. The company also beat revenue estimates by $600 million, posting total revenue of $32.6 billion for the quarter. 

The majority of this beat is the result of particularly strong sales growth for the company's health services platform called Optum. United reported that Optum sales for the quarter grew by 23% to $728 million. As a result, the company raised its full year revenue forecast to $130 billion, up from from $128 billion to $129 billion previously.

Although United still looks like it has problems with falling margins due to issues stemming from Obamacare, Optum's surprisingly strong growth does give investors a reason to be optimistic moving forward. 

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George Budwell has no position in any stocks mentioned. The Motley Fool recommends Baxter International and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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