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Baxter (BAX) Shares Rise 2.4% in July: Will It Go Higher?
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Shares of Baxter International (BAX - Free Report) have gained 2.4% in the first seven trading sessions in July after declining 13.5% in the first six months of 2024.
The decline in BAX’s shares during the first half can be attributed to challenges, including inflationary pressure and weaker ESRD patient volume in China due to the residual impact of COVID-19. Moreover, China’s value-based procurement initiatives are lowering realized price for the company’s products in the country.
Meanwhile, the recovery in Baxter’s share price in July can be attributed to a report about the discussion with a potential suitor for its kidney care business. The company has been preparing for a spin-off or a divestment of the business segment since last year.
Baxter’s shares have lost 11.4% year to date against the industry’s growth of 0.8%. The S&P 500 Index has increased 17.7% during the same time frame.
Kidney Care on Sale
Per a Reuters article, Baxter is currently in discussion with a private equity firm, Carlyle Group (CG - Free Report) , to complete the planned separation of its kidney care segment, which is likely to be called Vantive following the divestment. Carlyle Group is likely to offer more than $4 billion to acquire Vantive, including its debt. The companies entered into an exclusive discussion in late June, with a deal to be announced in the upcoming weeks. The deal should help Carlyle Group maintain its solid organic growth seen in the past several years on the back of its strategic investments.
BAX announced its plans to separate its kidney care segment in January 2023. This business segment includes sales of chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies and other organ support therapies. It generates more than 30% of Baxter’s total business every quarter.
The deal should help the company to bring down its debt level as the potential sale of Vantive will include debt on its books. Moreover, the sales should boost the cash resources that will help the company to pay off its debt as well as support its capital expenditure plans. The sale should help Baxter become leaner, which will place it in a better position to make future strategic investments, especially in high-growth areas. It will also optimize BAX’s manufacturing network and systems to improve its margin profile and create value.
The company announced several strategic action plans to enhance operational effectiveness, accelerate innovation for patients and drive value for shareholders in January 2023. As a part of this strategic action, Baxter divested its BioPharma Solutions business to Advent International for $4.25 billion in cash in June 2023, offloading a business that was facing declining sales following a reduction in COVID-19 vaccine manufacturing.
Image Source: Zacks Investment Research
What to Expect?
A leaner business model, combined with more focused actions, should help Baxter boost its business performance in the upcoming quarters following the separation of its kidney care business. A lower debt level should bring down interest expenses as well, boosting net margin. Meanwhile, increasing hospital admissions and rising procedural volume, coupled with higher alternate sites of care, are likely to drive the company’s prospects in 2024. These factors should help Baxter’s share price to continue to recover in the second half.
Zacks Rank & Other Key Picks
Currently, Baxter carries a Zacks Rank #2 (Buy).
A couple of other top-ranked stocks in the broader medical space that have announced quarterly results are Glaukos (GKOS - Free Report) and DexCom (DXCM - Free Report) .
Revenues of $86 million outpaced the consensus mark by 8.8 %. Glaukos’ shares have surged 51.1% year to date compared with the industry’s 2.9% growth.
Glaukos has a long-term growth rate of 43.1% for 2025. GKOS’ earnings surpassed estimates in two of the trailing four quarters and missed the same in two, the average negative surprise being 4.74%.
DexCom reported first-quarter 2024 adjusted EPS of 32 cents, which beat the Zacks Consensus Estimate by 18.5%. Revenues of $921 million surpassed the Zacks Consensus Estimate by 1.1%. The company currently carries a Zacks Rank #2. DexCom’s shares have lost 10.7% year to date against the industry’s 2.9% growth.
DexCom has a long-term growth rate of 22.9%. DXCM’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 34.10%.
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Baxter (BAX) Shares Rise 2.4% in July: Will It Go Higher?
Shares of Baxter International (BAX - Free Report) have gained 2.4% in the first seven trading sessions in July after declining 13.5% in the first six months of 2024.
The decline in BAX’s shares during the first half can be attributed to challenges, including inflationary pressure and weaker ESRD patient volume in China due to the residual impact of COVID-19. Moreover, China’s value-based procurement initiatives are lowering realized price for the company’s products in the country.
Meanwhile, the recovery in Baxter’s share price in July can be attributed to a report about the discussion with a potential suitor for its kidney care business. The company has been preparing for a spin-off or a divestment of the business segment since last year.
Baxter’s shares have lost 11.4% year to date against the industry’s growth of 0.8%. The S&P 500 Index has increased 17.7% during the same time frame.
Kidney Care on Sale
Per a Reuters article, Baxter is currently in discussion with a private equity firm, Carlyle Group (CG - Free Report) , to complete the planned separation of its kidney care segment, which is likely to be called Vantive following the divestment. Carlyle Group is likely to offer more than $4 billion to acquire Vantive, including its debt. The companies entered into an exclusive discussion in late June, with a deal to be announced in the upcoming weeks. The deal should help Carlyle Group maintain its solid organic growth seen in the past several years on the back of its strategic investments.
BAX announced its plans to separate its kidney care segment in January 2023. This business segment includes sales of chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies and other organ support therapies. It generates more than 30% of Baxter’s total business every quarter.
The deal should help the company to bring down its debt level as the potential sale of Vantive will include debt on its books. Moreover, the sales should boost the cash resources that will help the company to pay off its debt as well as support its capital expenditure plans. The sale should help Baxter become leaner, which will place it in a better position to make future strategic investments, especially in high-growth areas. It will also optimize BAX’s manufacturing network and systems to improve its margin profile and create value.
The company announced several strategic action plans to enhance operational effectiveness, accelerate innovation for patients and drive value for shareholders in January 2023. As a part of this strategic action, Baxter divested its BioPharma Solutions business to Advent International for $4.25 billion in cash in June 2023, offloading a business that was facing declining sales following a reduction in COVID-19 vaccine manufacturing.
Image Source: Zacks Investment Research
What to Expect?
A leaner business model, combined with more focused actions, should help Baxter boost its business performance in the upcoming quarters following the separation of its kidney care business. A lower debt level should bring down interest expenses as well, boosting net margin. Meanwhile, increasing hospital admissions and rising procedural volume, coupled with higher alternate sites of care, are likely to drive the company’s prospects in 2024. These factors should help Baxter’s share price to continue to recover in the second half.
Zacks Rank & Other Key Picks
Currently, Baxter carries a Zacks Rank #2 (Buy).
A couple of other top-ranked stocks in the broader medical space that have announced quarterly results are Glaukos (GKOS - Free Report) and DexCom (DXCM - Free Report) .
Glaukos, currently carrying a Zacks Rank of 2, reported first-quarter 2024 loss per share of 70 cents, which missed the Zacks Consensus Estimate by 20.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Revenues of $86 million outpaced the consensus mark by 8.8 %. Glaukos’ shares have surged 51.1% year to date compared with the industry’s 2.9% growth.
Glaukos has a long-term growth rate of 43.1% for 2025. GKOS’ earnings surpassed estimates in two of the trailing four quarters and missed the same in two, the average negative surprise being 4.74%.
DexCom reported first-quarter 2024 adjusted EPS of 32 cents, which beat the Zacks Consensus Estimate by 18.5%. Revenues of $921 million surpassed the Zacks Consensus Estimate by 1.1%. The company currently carries a Zacks Rank #2. DexCom’s shares have lost 10.7% year to date against the industry’s 2.9% growth.
DexCom has a long-term growth rate of 22.9%. DXCM’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 34.10%.