BAXTER INTERNATIONAL INC. $55 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 556.3 million; Market cap: $30.6 billion; Price-to-sales ratio: 2.2; Dividend yield: 2.4%; TSINetwork Rating: Average; www.baxter.com) makes medical products, such as intravenous pumps and kidney dialysis equipment. It also makes vaccines and drugs. Half of the company’s sales come from single-use products that continually need to be reordered.
Baxter earned $569 million in the first quarter of 2012. That’s down 0.2% from $570 million a year earlier. The company spent $575 million on share buybacks during the quarter. Because of fewer shares outstanding, earnings per share rose 3.1%, to $1.01 from $0.98.
These figures exclude several unusual items, such as costs to integrate Synovis Life Technologies Inc., which Baxter recently bought for $325 million. Synovis makes surgical tools and bandages.
Baxter’s revenue in the quarter rose 3.2%, to $3.4 billion from $3.3 billion, thanks to strong demand for its Advate hemophilia drug and its anesthesia products.
The company spent $269 million (or 7.9% of its revenue) on research in the latest quarter. That’s up 25.7% from $214 million (or 6.5% of revenue) a year earlier. This spending hurts Baxter’s earnings, but the resulting new products should continue to fuel its long-term growth.
Baxter gets 60% of its revenue from outside the U.S. Unfavourable currency exchange rates will probably cut its 2012 earnings by around $0.15 a share. Even so, earnings for the year should climb to $4.53 a share. The stock trades at 12.1 times that estimate. The $1.34 dividend yields 2.4%.
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