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Baxter International Inc. Rebuilding After Divorce

By Brian Orelli, PhD - Feb 5, 2016 at 4:10PM

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Modest revenue growth expected after the separation, but earnings look nice.

Baxter (BAX 1.96%) reported fourth-quarter earnings on Tuesday. Let's take a look at how the hybrid drug and hospital products maker fared in its second quarter after the split from Baxalta (NYSE: BXLT).

Baxter results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

YOY Growth (Decline)


$2.6 billion

$2.7 billion


Income From Continuing Operations

$190 million

$127 million


Earnings Per Share




What happened with Baxter this quarter?

  • Baxter's earnings numbers are all over the place this quarter after spinning off Baxalta.
  • A stronger dollar accounted for all of the year-over-year decrease in revenue and then some. On a constant currency basis, revenue would have been up 2% year over year.
  • Looking at the business from a continuing operations point of view makes sense because Baxalta was a drag on the company.
  • If you back out Baxalta and a few special items out of the earnings, Baxter earned $0.43 per share, a 54% increase over the $0.28 per share in the year-ago quarter using the same criteria.


What management had to say
President and CEO Jose Almeida highlighted where the revenue growth -- at constant currencies -- came from "key growth drivers in the quarter included strong performance in our U.S. fluid systems franchise where our newly launched Sigma Spectrum infusion pump continues to build momentum as well as increase in demand and favorable pricing for our IV solutions." Almeida added that the launch of the new Amia automated peritoneal dialysis (APD) cycler is going well: "Performance was also augmented by strength in our U.S. peritoneal dialysis business, which reported the highest quarterly growth of the year. .. We are in process of developing a strategic framework that will shape our priorities and direct our approach and investments moving forward."

The framework involves optimizing the portfolio of products the company sells, making the company more efficient to reduce costs and allocating capital to maximize "value over both the short and long term."

Looking forward
Management's revenue guidance for 2016 -- a decrease of 1% over last year -- is muted by the continued impact of the stronger dollar and generic competition for cyclophosphamide. Excluding those issues, management thinks sales could be up 3% to 4%.

On the bottom line, management is guiding for 2016 adjusted earnings in the $1.46 to $1.54 per share range, a nice bump from the $1.38 per share Baxter earned on an adjusted basis last year. The difference between the decreased revenue and the increased earnings is attributable to a paying down of debt through the sales of Baxalta shares as well as a reduced number of shares from a plan that will allow investors to trade in Baxter shares for shares in Baxalta that the company still owns.

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