By Yanchun (Roxanne) Liu
Baxter International Inc. (NYSE: BAX), Deerfield-based medical product manufacturer, reported adjusted earnings that surpassed Wall Street expectations and declaraed an intention to continue share buybacks.
Nevertheless, Baxter shares dropped 2.9 percent Thursday.
On a GAAP basis, the company lost $71 million, or 13 cents per diluted share, in the fourth quarter ended Dec. 31, compared with a profit of $243 million, or 44 cents per share, in the prior-year quarter, a result caused by a charge of $322 million, or 58 cents per diluted share, related to the recent tax reform.
Excluding special items, the company’s fourth-quarter adjusted income from continuing operations rose 14 percent to $354 million, or 64 cents per diluted share, from $312 billion, or 57 cents per share a year earlier, beating the Wall Street consensus estimate of 59 cents per share compiled by Bloomberg.
The adjusted earnings, exceeding the company’s guidance of 56 cents to 59 cents per share, was “driven by operational strength, expense savings, and the gain on foreign exchange balance sheet positions”, Chief Financial Officer James Saccaro said during a conference call with analysts.
For Edward Jones analyst John Boylan, Baxter was “OK” in the fourth quarter, despite “a mild disappointment” considering the strong results the company has demonstrated over the time span of a year and a half.
“Much of the earnings per share outperformance were due to a lower than-expected tax rate and higher-than-anticipated other income,” Boylan said in an email. “We prefer that companies beat their earnings per share estimate with strong business results, as opposed to tax and financial matters.”
The company’s quarterly net sales rose 5 percent to $2.77 billion from $2.65 billion, contributed by consistent strength across the company’s domestic fluid systems and renal segment, along with global momentum in nutrition, and heightened demand for the firm’s cytotoxic contract manufacturing services, Saccaro said.
The company reported $1.2 billion free cash flow for the year ended Dec. 31, up more than $300 million compared with the year-earlier results, boosted by underlying operational performance, lower capital expenditures and improved working capital performance, Saccaro said.
“We’ll continue to buy shares,” CEO José Almeida said in the conference call. “We are going to continue to pay the dividends and increase dividends every year like we have done in the past, and do the small deals or deals which are complementary with higher volume and velocity.”
The company expects to repurchase roughly $500 million of shares in the current quarter ended March 31, compared with the full-year buyback of about $600 million in 2017, Saccaro said.
For the full year 2017, the company reported an 86 percent drop in net income to $717 million, or $1.29 per diluted share, from $5.0 billion, or $9.01 per share in the earlier year. Adjusted income from continuing operations rose 28 percent to $1.38 billion, or $2.48 per diluted share, from $1.08 billion, or $1.96 per share. Annual net sales rose 4 percent to $10.6 billion from $10.2 billion.
The company said it expects adjusted earnings to range from $2.72 to $2.80 per diluted share in 2018. GAAP-based diluted per-share earnings are estimated to be between $2.25 and $2.38. Sales are anticipated to increase by 6 percent to 7 percent. The company expects full-year free cash flow of $1.4 billion.
Baxter International shares closed at $69.95, down $2.08.