On October 25, 2016 Baxter International Inc. (NYSE:BAX) reported results for the third quarter of 2016, and increased its earnings per share outlook for full-year 2016. Baxter’s third quarter worldwide sales totaled $2.6 billion, an increase of 3 percent on a reported basis and 4 percent on a constant currency basis as compared to the prior-year period (Press release, Baxter, OCT 25, 2016, View Source [SID1234515982]).
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"We are pleased with the continued strength across our core franchises as well as our improved financial performance, both of which are reflected in our third quarter results," said José (Joe) E. Almeida. "Given this progress, we are intensifying our focus on portfolio management and innovation to accelerate our efforts to introduce new products and therapies."
Financial Results
During the quarter, Baxter reported income from continuing operations of $127 million, or $0.23 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis. These results included net after-tax special items totaling $184 million, primarily related to business optimization initiatives, intangible asset amortization, debt extinguishment and Baxalta related spin-off costs.
On an adjusted basis, excluding special items, Baxter’s third quarter income from continuing operations totaled $311 million, or $0.56 per diluted share, exceeding the company’s previously-issued guidance of $0.43 to $0.45 per diluted share.
Baxter’s worldwide sales totaled $2.6 billion in the third quarter, an increase of 3 percent on a reported basis and 4 percent on a constant currency basis as compared to the prior-year period. Sales within the U.S. were $1.1 billion, advancing 6 percent, while international sales totaled $1.5 billion, representing a 1 percent increase on a reported basis, and an increase of 3 percent on a constant currency basis. Adjusting for the impact of foreign exchange, generic competition for cyclophosphamide, and 2015 PROTOPAM orders, Baxter’s sales increased 12 percent in the U.S. and rose 6 percent globally in the third quarter.
By business, Hospital Products sales of $1.6 billion in the third quarter increased 2 percent on a reported basis and 3 percent on a constant currency basis. Adjusting for the impact of foreign exchange, cyclophosphamide and PROTOPAM, Hospital Products sales advanced 7 percent from the prior-year period. Hospital Products performance in the quarter benefited from strong sales across the portfolio, driven by increased demand and favorable pricing in the U.S. for the company’s IV solutions, nutritional therapies, pharmacy injectables and IV access administration sets. Strength internationally in the company’s hospital pharmacy compounding services and cytotoxic contract manufacturing business also contributed to growth in the quarter.
Baxter’s Renal sales totaled $977 million in the third quarter, representing a 4 percent increase on a reported basis, and a 6 percent increase on a constant currency basis. Growth was driven by strong sales of peritoneal dialysis products as well as increased demand globally for continuous renal replacement therapies. Contributing to growth in the quarter were the recent launches of Baxter’s new Automated Peritoneal Dialysis (APD) systems, AMIA in the U.S. and HOMECHOICE CLARIA outside the U.S. Both of these systems utilize Baxter’s SHARESOURCE Connectivity Platform, which is the first and only two-way, remote patient management system for home dialysis therapy globally.
Financial Outlook
Based on the company’s strong performance in the first three quarters of the year, Baxter is raising its financial outlook for full-year 2016 including sales growth of approximately 2 percent on a reported basis or 4 percent on a constant currency basis, and earnings from continuing operations, before special items, of $1.88 to $1.91 per diluted share for the full year. Previous guidance called for reported sales of 1 to 2 percent (or 3 to 4 percent constant currency) and earnings of $1.69 to $1.74 per diluted share.
For the fourth quarter, the company expects sales growth of approximately 2 percent on both a reported and constant currency basis. Baxter expects earnings from continuing operations, before special items, of $0.49 to $0.52 per diluted share for the fourth quarter of 2016.
The earnings per share guidance for the fourth quarter and full-year 2016 excludes $0.05 and $0.22, respectively, per diluted share of intangible asset amortization expense; an estimated $0.01 and $0.07, respectively, per diluted share of Baxalta separation-related expense activities; an estimated $0.07 and $0.51, respectively, per diluted share of business optimization charges; and $7.84 per diluted share of asset impairment, debt extinguishment loss, product related reserve adjustments, and Baxalta retained stake gains for full-year 2016. These estimates are based on information reasonably available at the time of this release and future events or new information may result in different actual results. Reconciling for the inclusion of these items results in GAAP earnings of $0.36 to $0.39 per diluted share for the fourth quarter of 2016, and $8.92 to $8.95 per diluted share for full-year 2016.
A webcast of Baxter’s third quarter conference call for investors can be accessed live from a link on the company’s website at www.baxter.com beginning at 7:30 a.m. CDT on October 25, 2016.
Please see www.baxter.com for more information regarding this and future investor events and webcasts.
Baxter provides a broad portfolio of essential renal and hospital products, including home, acute and in-center dialysis; sterile IV solutions; infusion systems and devices; parenteral nutrition; biosurgery products and anesthetics; and pharmacy automation, software and services. The company’s global footprint and the critical nature of its products and services play a key role in expanding access to healthcare in emerging and developed countries. Baxter’s employees worldwide are building upon the company’s rich heritage of medical breakthroughs to advance the next generation of healthcare innovations that enable patient care.