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What's Behind Baxter International's Better-Than-Expected Q4 Results

By Keith Speights - Mar 17, 2020 at 11:30AM

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The healthcare giant's medication delivery business provided its strongest growth in Q4.

Baxter International (BAX 0.12%) is faring better than most stocks in the coronavirus-fueled bear market. Shares of the healthcare giant are handily outperforming the S&P 500 index.  

And its shares should now enjoy at least a temporary boost. Baxter announced its 2019 fourth-quarter and full-year results before the market opened on Tuesday. Here are the highlights from the company's Q4 update.

Male healthcare provider standing with his arms crossed, smiling

Image source: Getty Images.

By the numbers

Baxter reported worldwide revenue in the fourth quarter of $3 billion, up 7% year over year. This result narrowly topped the consensus analyst estimate of $2.98 billion.

The company announced a fourth-quarter net loss of $23 million, or $0.05 per share, based on generally accepted accounting principles (GAAP). Baxter posted net income of $305 million, or $0.57 per share, in its restated results for the prior-year period. The company had to restate results for 2017 and 2018.

On an adjusted basis, Baxter's net income in the fourth quarter was $0.97 per share. This reflected a 37% increase from the adjusted net income of $0.71 per share generated in Q4 of 2018. The average analysts' Q4 estimate projected Q4 adjusted earnings of $0.88 per share. 

Behind the numbers

Baxter's medication delivery business was its strongest performer in Q4, with revenue jumping 18% year over year to $775 million. Most of its other businesses achieved similar levels of growth. Revenue increased 8% year over year for pharmaceuticals, clinical nutrition, and advanced surgery. The company's acute therapies revenue rose 6% year over year. But revenue for its biggest business, renal care, increased by only 1% year over year to $960 million.

The company performed best in the Americas, with revenue climbing 9% year over year. Its Asia-Pacific region delivered year-over-year revenue growth of 7%. Growth was slowest in Europe, with revenue rising only 3% from the prior-year period.

Baxter's GAAP net loss stemmed in large part from a $568 million after-tax noncash pension settlement charge. The company also incurred additional expenses related to business optimization and intangible asset amortization that contributed to its deteriorating GAAP bottom line.

Looking ahead

Due to the uncertainty with any potential negative financial effects from COVID-19, Baxter didn't provide full-year 2020 guidance. The company stated that it expects to provide an update during its Q1 earnings update on April 30. 

But Baxter did give its guidance for Q1, projecting that sales growth will be between 4% and 5% with adjusted net income between $0.72 and $0.74 per share.

Nearly every healthcare stock -- including Baxter -- will likely remain highly volatile in light of the coronavirus pandemic. So far, though, the financial impact for Baxter hasn't been significant. 

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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