Healthcare company Baxter International Inc. (BAX), on Thursday morning, posted a 26% growth in its second quarter profit, helped by improved margins and 13% sales growth. On a per share basis, adjusted earnings rose 18% on year and topped analysts estimate by three cents. Further, the company issued earnings forecast for the third quarter and raised its full year 2008 earnings guidance.
Second Quarter Results
The Deerfield, Illinois-based company posted net income for the second quarter of $544 million, up 26% from $431 million reported in the year-ago quarter. Earnings per share for the quarter totaled $0.85, an increase of 31%, compared to $0.65 reported in the same quarter of last year.
Results for the prior-year quarter included an after-tax charge of $46 million or $0.07 per share, for additional costs associated with the company's consolidation of certain commercial and manufacturing operations outside of the U.S.
On an adjusted basis, net income advanced 14% to $544 million from $477 million last year. Adjusted earnings per share rose 18% to $0.85 from $0.72 in the year-earlier quarter. Previously, the company expected second quarter earnings in the range of $0.81 - $0.83 per share.
On average, 7 analysts polled by First Call/Thomson Financial expected the company to earn $0.82 per share for the quarter.
The company's adjusted results were benefited by continued improvement in gross margins, due to enhanced business, product and geographical mix as well as improved pricing and continued manufacturing cost improvements.
Net sales for the second quarter amounted to $3.2 billion, up 13% from previous year's sales of $2.8 billion, and surpassed six Wall Street analysts' consensus revenue estimate of $3.05 billion. Excluding the impact of foreign exchange, sales grew 5%.
Sales within the United States rose 4% to $1.24 billion and international sales amounted to $1.95 billion, a growth of 19% over the same period last year. However, excluding the impact of foreign exchange, international sales grew only 6%.
Segmental Details
Baxter's BioScience business generated second quarter sales of $1.38 billion, up 16% over last year, reflecting strong double-digit sales growth across all product categories, besides robust growth from several products used for the treatment of hemophilia and immune disorders. However, excluding the impact of foreign exchange, sales grew only 8%.
Medication Delivery sales were up 12% to $1.16 billion, aided by strong global sales of intravenous products and significant growth in international sales of anesthesia products and injectable drugs. Excluding the impact of foreign exchange, sales grew only 5%.
Renal sales increased 8% to $598 million from the same quarter last year, helped by an increase in peritoneal dialysis patients in many global markets. Excluding the impact of foreign exchange, sales declined 1%.
Other Metrics
Cost of goods sold in the most-recent quarter was up 9% to $1.56 billion from the prior-year quarter. Gross profit for the second quarter was $1.63 billion, up 17% from $1.39 billion in the year-ago quarter, while gross margin percentage increased 1.8 percentage points to 51.0%.
Marketing and administrative expenses increased 13% to $703 million from a year ago, but as a percentage of sales it remained flat. Baxter's investment in research and development or R&D grew 25% to $222 million from last year, as the company continues to advance its product pipeline across its business portfolio.
Commenting on the results, chairman and chief executive officer of Baxter, Robert Parkinson, Jr. said, "Our positive financial performance in the first half of 2008 continues to reflect the strength of our diversified business model, and positions us well in this uncertain global economy."
Six-month Highlights
For the half-yearly period, Baxter reported net income of $973 million or $1.52 per share, up from $834 million or $1.26 per share in the year-ago period. On an adjusted basis, net income advanced to $1.02 billion or $1.59 per share from $0.88 billion or $1.33 per share in the prior-year period.
Net sales for the six-month period amounted to $6.07 billion, up 10% from previous year's sales of $5.50 billion. Excluding the impact of foreign exchange, sales grew 3%.
Looking ahead
Baxter expects third quarter earnings, before any special items, in a range of $0.81 - $0.83 per share on a quarterly sales growth, excluding foreign exchange impact, of 6% - 8%. On average, five analysts estimate earnings of $0.81 per share on revenues of $3.01 billion.
Based on the company's strong half-yearly performance, Baxter raised its earnings forecast for fiscal 2008, before any special items, to a range of $3.28 - $3.32 per share from the previous estimate in the range of $3.18 - $3.24 per share. Baxter expects sales growth for the year, excluding foreign exchange impact, of 5% - 6%. Analysts anticipate earnings of $3.24 per share on revenues of $12.22 billion.
Stock Quote
In Thursday's regular trading session, BAX is trading at $65.61, down $0.24 or 0.36% on a volume of 1.22 million shares. In the past 52-week period, the stock has been trading in a range of $49.30 to $67.00.
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