Baxter beats the The Street, CEO Parkinson to bow out

Baxter (NYSE:BAX) managed to beat expectations on Wall Street with its 2nd-quarter results, despite a more than 36% bottom-line slide, saying longtime CEO Robert Parkinson Jr. plans to step down now that the spinout of its Baxalta pharmaceuticals division is complete.

Deerfield, Ill.-based Baxter posted profits of $332 million, or 60¢ per share, on sales of $3.89 billion for the 3 months ended June 30, for a profit slide of -36.2% on a -6.3% sales decline compared with Q2 2014.

Adjusted to exclude 1-time items, earnings per share were $1 even, a nickel ahead of The Street, which was expecting sales of just $2.4 billion.

“The spin-off of Baxalta was a historic event for the company, and we are excited to embark on this new chapter for Baxter with a newfound focus and vision that furthers our mission to help save and sustain lives,” Parkinson said in prepared remarks. “As the new Baxter evolves, we are intensely focused on accelerating profitable growth and expanding margins through disciplined portfolio management, implementation of cost reduction initiatives and the near-term launches of innovative new products. These efforts will drive meaningful value, both in the near and long terms, for our shareholders, partners, employees, and the patients and healthcare providers we serve.”

Baxter said it expects to post adjusted EPS of 58¢ to 62¢  for the rest of 2015, on constant-currency sales growth of 3%. Third-quarter adjusted EPS are pegged at 29¢ to 31¢, again on constant-currency sales growth of 3%.

In a conference call with analysts yesterday, Parkinson said the time is right for retirement, given his impending 65th birthday and 11 years at the helm of Baxter.

Calling the decision to find a successor a “front-burner issue” for the board, Parkinson said succession talks began several years ago but were put on the back burner until the Baxalta deal was done.

“Our board has had in place, through the governance committee, an established succession plan process for a long time. And in fact, just to provide a little color for everyone, we had discussions on this going back over the last few years. But clearly as we approach the spinoff, we kind of took the notion of succession and set it up on the shelf a little bit,” he said, according to a Seeking Alpha transcript. “I will say the decision to spin off [Baxalta] clearly wasn’t a result of any succession planning, but the reality is, as a result of the spinoff, it did answer the succession question for that big piece of the business.

“It also allows the board to go forward now and evaluate succession in the context of a medical products/medical device company which, in terms of experience and so on, can be a much more focused search,” Parkinson added. “So now, given the fact that the spin has taken place, recognizing the progress and the momentum that’s building at new Baxter, as I said, this has now become a new priority.”

BAX shares closed up 3.9% at $40.01 apiece today.

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