To me, health-care company Baxter (NYSE:BAX) is kinda like vanilla ice cream -- there's nothing really wrong with it, per se, but is there really any reason to go out of your way to get some? The company is certainly saying the right things about getting growth back on track, but it seems to me those expectations are largely baked into the story today.
Looking at the quarter that was, revenue growth was all of 3%, and a third of that came from favorable foreign exchange. The bioscience business had a good quarter, with 12% top-line growth, but renal (up 1%) and medication delivery (down 3%) weighed that down. With operating margins holding steady, the company produced 4% growth in operating income and 12% growth in earnings per share (excluding charges related to unusual taxes and closing down the hemodialysis instrument business).
What makes Baxter a little unusual is that there's a fair bit of sales variation within those top-line business unit sales. For instance, recombinant product sales were up 15% and antibody revenues were up 50%. Elsewhere, IV therapy revenues were up in the high single digits, while growth was down in drug delivery and infusion systems. Of course, the infusion systems business is still troubled by the ongoing regulatory problems with the COLLEAGUE infusion pump -- an issue that doesn't seem set up for an easy resolution anytime soon.
To its credit, management is not sitting on its hands. Rather, it is pursuing growth initiatives -- and a recent research agreement with Nektar Therapeutics (NASDAQ:NKTR) is one part of that. Better still, even if revenue growth is sluggish, the company is still producing good growth in cash flow and, when it's all said and done, cash flow is what really matters.
Trading at nearly 20 times forward earnings, it seems like expectations of a growth revival are already in the stock. Then again, it's not as though rival Hospira (NYSE:HSP) is any cheaper. Despite good cash flow characteristics, I'm not all that drawn to this part of the health-care space. Baxter, Hospira, Bard (NYSE:BCR), and Becton Dickinson (NYSE:BDX) all have good businesses, but I'm just not that interested in the stocks.
For more medical takes:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
