Healthcare company Baxter International Inc. (BAX) on Thursday reported an increase in third-quarter profit, helped by margin expansion and lower expenses, despite near-flat revenues. Earnings, on a per share basis, increased from last year, and topped analysts' consensus estimate, helped by the ongoing share repurchase program. Looking ahead, the company issued fourth-quarter forecast in line with Street view and lifted its full year earnings outlook.
Deerfield, Illinois-based Baxter's third-quarter net income attributable to the company grew 12% to $530 million from $472 million in the third quarter of 2008. Earnings per share for the quarter increased 18% to $0.87 from $0.74 reported in the prior-year period.
Results of the latest quarter included after-tax special charges totaling $69 million, or $0.11 per share, primarily for fixed asset write-offs related to the discontinuation of the company's Solomix drug delivery system in development, and planned retirement costs associated with the Syndeo PCA Syringe Pump. The company recorded after-tax special charges totaling $91 million or $0.14 per share in the third quarter of 2008.
On an adjusted basis, Baxter's net income grew to $599 million or $0.98 per share from $563 million or $0.88 per share reported in the third quarter last year. On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.96 per share. Analysts' estimates typically exclude special items.
''This financial performance was the result of continued margin expansion, expense leverage and benefits derived from the company's ongoing share repurchase program'', Baxter said in a statement.
The company had estimated third-quarter earnings before any special items to range between $0.95 and $0.97 per share.
The company's second-quarter net income was $587 million, up from $544 million in the prior-year quarter. On a per-share basis, earnings advanced to $0.96 from $0.85 in the same quarter of last year.
Net sales for the quarter were $3.145 billion, compared to $3.151 billion in the prior year quarter. Excluding the impact of foreign currency, Baxter's worldwide sales increased 6%. Analysts expected revenues of $3.17 billion for the quarter.
The company's third-quarter sales growth, excluding the impact of foreign currency, was estimated to be about 7% - 8%. Baxter expected reported sales, including the impact of foreign currency, to be about flat over the prior-year period.
The company's second-quarter net sales totaled $3.12 billion, down 2% from the previous year's net sales of $3.19 billion.
The company operates through three segments: BioScience, Medication Delivery, and Renal. Total BioScience sales for the third quarter grew to $1.385 billion from $1.354 billion in the prior year with sales of Antibody therapy and Regenerative medicine advancing 12% and 10%, respectively, at constant rates from last year. The company noted that growth in the segment was helped by ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] for the treatment of hemophilia, antibody therapies and several specialty plasma therapeutics, as well as biosurgery products.
Total Medication Delivery sales increased to $1.168 billion from $1.157 billion. On a currency neutral basis, sales of IV Therapies, Global injectables and anesthesia increased in the latest period, while sales of Infusion Systems dipped from last year.
Total Renal sales during the quarter were $576 million, down from last year's $593 million. Transfusion Therapies generated $16 million in the latest period, compared to $47 million last year. Transfusion Therapies represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the TT business after the February 2007 divestiture.
Total U.S. Sales during the quarter was $1.332 billion, up 5% from last year, while International sales amounted to $1.813 billion, a decline of 4% from the previous year.
Cost of sales dropped to $1.513 billion from $1.630 billion. Gross margin rose 3.6 points to 51.9% from 48.3%. marketing & administrative expenses as well as research and development expenses dropped 1% from last year.
For the first nine months of the year, net income attributable to the company grew to $1.633 billion or $2.66 per share from $1.445 billion or $2.26 per share in the prior year. Net sales dipped to $9.092 billion from $9.217 billion in the prior year.
Over the past year, Baxter has initiated 14 Phase III clinical trials. Recently, the European Commission granted marketing authorization for the company's H1N1 pandemic vaccine Celvapan H1N1.
Looking ahead, for the fourth quarter of 2009, Baxter expects earnings per share to be in the range $1.02 to $1.04, before any special items. Baxter expects fourth-quarter sales growth, excluding the impact of foreign currency, of 6% to 8%. Reported sales including the impact of foreign currency are expected to increase 8%-10% in the fourth quarter over the prior-year period. Analysts expect the company to report earnings of $1.03 per share on revenues of $3.32 billion for the fourth quarter.
Further, the company raised its full year 2009 earnings, before any special items, outlook to a range of $3.79 - $3.81 per share from the prior range of $3.76 - $3.80 per share. Analysts expect the company to report earnings of $3.79 per share for the full year 2009.
For the full year 2009, Baxter expects sales growth, excluding the impact of foreign currency, to increase 7% to 8%. Based on the company's outlook for foreign exchange rates, Baxter now expects reported sales growth to increase approximately 0% to 1%. Analysts expect the company to report revenues of $12.43 billion.
For the full year, Baxter's forecast issued in July was for earnings before any special items to be in the range of $3.76 - $3.80 per share and sales growth, excluding the impact of foreign currency, of about 7% - 8%. Prior to that, the company had projected full year earnings of $3.72 - $3.78 per share.
Last month, Baxter revealed that over its five-year long-range plan period, the company expects to grow earnings per share in an 11%-13% range and increase sales 7%-8% on a currency-neutral basis.
BAX closed Wednesday's regular trade at $57, down from the previous close of $57.70, on 7.10 million shares. For the past year, the stock traded in the range of $45.46-$63.46.
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