CHICAGO, April 25, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Baxter International Inc. (NYSE: BAX), Becton, Dickinson and Company (NYSE: BDX), Biotherapeutics Holdings Corp. (Nasdaq: TLCR), Western DigitalCorporation (NYSE: WDC) and Hitachi Global Storage Technologies (NYSE: HIT).
Baxter International Inc. (NYSE: BAX) reported first-quarter 2011 adjusted (excluding one-time items) earnings per share of 98 cents, beating the corresponding Zacks Consensus Estimate of 93 cents, and surpassing the year-ago results also of 93 cents. The results exceeded Baxter's earlier guidance of 92 cents to 94 cents.
Baxter reported profit of $570 million (or 98 cents a share) in the quarter versus a loss of $63 million (or 11 cents a share) a year ago. Its first quarter results in 2010 included after-tax special items aggregating $627 million (or $1.04 per share) arising from the Colleague infusion pump and a change in certain tax treatment.
The forecast-topping results, coupled with the company's upward revisions to guidance, pushed up its shares $1.48 (2.71%) to $56 in early trading on April 21.
Total revenues were $3,284 million in the first quarter, up 12% year over year, beating the Zacks Consensus Estimate of $3,178 million. Revenues in the prior year included an adjustment of $213 million for the Colleague infusion pump. Excluding this adjustment, worldwide sales grew 5% year over year. Domestic revenues for the quarter jumped 10% to $1,422 million while overseas sales were higher 1% to $1,862 million.
Segment-wise Revenue Analysis
With regard to segment performance, Bioscience revenues totaled $1,408 million, up 3% (up 4% in constant currency) year over year. The better performance was attributable to higher demand for Gammagard Liquid, several specialty plasma-based therapeutics and biosurgery products.
The largest sub-segment, Recombinants, had sales of $512 million, flat in reported terms (up 1% in constant currency) year over year. The Plasma Proteins business, where Baxter had encountered structural problems in the past, performed well with revenues of $308 million, up 5% (up 8% in constant currency) year over year. Antibody Therapy performed sharply better with sales of $374 million, climbing 16% (up 18% in constant currency) year over year.
Revenues from Medication Delivery went up steeply by 20% year over year (up 19% in constant currency), to $1,868 million, riding on growth in intravenous and nutritional therapies as well as a broad range of generic and pre-mixed injectable drugs. This segment now includes Renal products.
The three prominent sub-segments were Renal with revenues of $587 million, down 1% in constant currency; IV Therapies with sales of $428 million, up 10% in constant currency basis; and Global Injectables with revenues of $517 million, up 14% in constant currency.
Gross margin was 51% in the first quarter, down from 51.9% in the year-ago quarter. Marketing and administrative expense, expressed as a percentage of sales, was flat at 21.8% while research and development expense dropped to 6.5% from 7.2% in the year-ago quarter.
Cash and cash equivalents totaled $2,168 million, as of March 31, 2011, down 18.9% year over year. Net debt totaled $2,206 million, up 6.1% year over year.
Outlook and Recommendation
Baxter issued its guidance for second-quarter fiscal 2011 and raised its estimates for 2011. For the second quarter, the company expects growth in revenues in the range of 4% to 5% in constant currency, and adjusted earnings per share in the range of $1.01 to $1.03.
Baxter anticipates growth in revenues in the range of 3% to 4% (earlier 2% to 3%), in constant currency, and adjusted earnings per share of about $4.20 to $4.28 (earlier $4.15 to $4.25) for fiscal 2011. The current Zacks Consensus Estimates are $1.01 and $4.20 per share for the second quarter and fiscal 2011, respectively.
The news regarding Baxter remains mixed. Its pipeline remains strong. On the positive side, Baxter's focus on life-sustaining products, which are not commoditized, partly insulates it from an economic downturn. The company is able to generate recurring revenues, and consistent cash flow, due to its focus on chronic diseases.
On the flip side, despite recent improvement in Plasma Proteins and Antibody Therapy sub-segments, we are concerned about stagnation in sales, a still somber outlook for some hospital spending and tightening of reimbursement.
The lingering bearishness surrounding the stock can be lifted by consistent execution. Baxter is a good bet for value investors willing to wait as fundamentals improve. Among others, it competes with Becton, Dickinson and Company (NYSE: BDX) and Talecris Biotherapeutics Holdings Corp. (Nasdaq: TLCR) in certain niches. We currently have a Neutral long-term rating on Baxter. The stock currently retains a Zacks #2 Rank, which translates into a short-term Buy recommendation.
WDC Exceeds, EPS Tumbles
Western DigitalCorporation (NYSE: WDC) reported third quarter fiscal 2011 earnings per share (EPS) of 66 cents, which exceeded the Zacks Consensus Estimate of 65 cents. Revenues of $2.25 billion also bettered the Zacks Consensus Estimate of $2.24 billion.
Third quarter fiscal 2011 revenue of $2.25 billion declined 14.8% year over year and 9.0% sequentially. The downfall was due to a $6.0 year over year and $2.0 sequential decline in average hard drive selling price, to $45 per unit. Moreover, total Hard Disc Drive (HDD) units shipped during the third quarter were 50.0 million, down from 51.0 million in the year-ago period.
Revenue from sales of the company's flagship products, including WD TV and WD LiveWire products was down 6.0% from the year-ago quarter and 19.0% from the prior quarter.
In the airline enterprise market, the company sold 5.6 million units, up from 5.2 million units sold in the year-ago period and 5.4 million units in the previous quarter. This increase can be attributed to the expansion of cloud computing, which is expected to see further upside. The traditional enterprise market increased to 8.3 million units from 7.4 million units in the year-ago quarter, but remained flat on a sequential basis. This reflected continued strength in the commercial market.
The company's third quarter gross margin was 18.2%, down from 25.2% in the prior-year quarter, and 19.2% in the prior quarter. The company reported a 100 basis point sequential decline in gross margin resulting from a seasonal decline in its branded products business and some costs associated with the under utilization of its manufacturing assets.
Consolidated research and development (R&D) as well as selling, general and administrative (SG&A) spending stood at $252.0 million, or 11.2% of revenues in the third quarter. This compares with $224.0 million or 8.5% of revenues during the year-ago quarter. As a result, operating income came in at $158.0 million or 7.0% of revenues in the third quarter compared to $319.0 million or 16.7% of revenues in the year-ago quarter.
Net income decreased to $146.0 million, or 62 cents per share, compared to $400.0 million, or $1.71 in the year-ago quarter and $265.0 million, or $1.13 in the previous quarter. Excluding the impact of stock-based compensation, the adjusted net income for the quarter was $156.0 million or 66 cents per share, compared to $400.0 million or $1.71 per share in the year-ago quarter.
The company generated $390.0 million of cash from operations in the quarter, down from $505.0 million in the previous quarter. Cash and cash equivalents were $3.20 billion, down from $3.08 billion reported in the previous quarter. Capital expenditures were $175.0 million, while depreciation and amortization totaled $151.0 million. The company made $25.0 million of debt repayment during the third quarter, thereby reducing the debt balance to $325.0 million.
For the fourth quarter of fiscal 2011, the company expects revenues in the range of $2.20 billion to $2.25 billion, total R&D and SG&A expense of approximately $245.0 million, a tax rate between 6.0% and 9.0%, and non-GAAP EPS of 60 to 65 cents.
Western Digital's third quarter 2011 results exceeded our expectations although sales and net profit declined on a year-over-year basis. The company is trying to lower its interest expense by reducing its debt burden. Although Western Digital is cash rich, its cash generation ability suffered because of the difficult pricing environment.
Moreover, the company recently disclosed its intention to acquire Hitachi Global Storage Technologies (NYSE: HIT), which should strengthen its grip on the data storage business. However, while we are encouraged by the company's recent performance, intense competition in the hard disk manufacturing space and within its distribution channel remains a concern.
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