Baxter beats the Street despite plunging Q2 profits

Baxter (NYSE:BAX) managed to exceed the consensus forecast on Wall Street for its second-quarter results, despite plunging profits on low-single-digit sales growth, and raised its outlook for the rest of the year.

The Chicago-area healthcare titan said today that profits were down -78.1% to $265 million, or 48¢ per share, on sales growth of 0.8% to $2.61 billion for the three months ended June 30. Adjusted to exclude one-time items, earnings per share were 63¢, topping the 57¢ consensus on the Street, where analysts were looking for sales of $2.60 billion.

“Our solid second-quarter performance reflects continued execution of our strategic objectives,” chairman & CEO Joe Almeida said in prepared remarks. “Baxter’s focus on innovation and operational excellence is fueling our mission to save and sustain lives, and deliver improved performance for our patients, customers and shareholders. In light of this progress and potential, we are raising our financial outlook for both full-year 2017 and 2020.”

Baxter said it now expects to post adjusted EPS of $2.34 to $2.40 this year, up from prior guidance of $2.20 to $2.28, on constant-currency sales growth of roughly 4% compared with 2% to 3% previously. The guidance assumes a successful closing for its $625 million acquisition of Claris Injectables by the end of this month. Third-quarter adjusted EPS are pegged at 58¢ to 60¢ on constant-currency sales growth of about 5%, Baxter said.

The company also said it’s raising its 2020 outlook due to its “ongoing business transformation efforts,” setting a sales growth goal of 4% on a compounded annual basis from 2016 to 2020. Adjusted operating margins are now predicted to grow roughly 20%, up from 17% to 18% previously. Baxter said it expects to report adjusted EPS of $3.25 to $3.40 in 2020 on operating cash flow of $2.65 billion.

“Baxter’s increased financial outlook and enhanced free cash flow generation provide the flexibility to invest in the business both organically and inorganically while also returning meaningful value to shareholders through dividends and share repurchases,” added CFO Jay Saccaro. “The company is well-positioned to execute on its aspiration of delivering sustainable industry-leading performance.”

The news pushed BAX shares up 0.8% to $62.60 apiece in pre-market trading. The stock opened at $61.05, down -1.7%, and was trading at $61.49 per share in early activity.

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