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Baxter Raises Guidance As Hospital Market Rebounds; Stock Hits High

Shares of medical-product maker Baxter International ( BAX ) hit an all-time high Tuesday after the company beat Q1 estimates and raised its guidance. Baxter’s earnings, excluding one-time items, rose 6% over the year-earlier quarter to 36 cents a share, beating analysts’ consensus by seven cents, according to Thomson Reuters. Sales declined 1% to $2.38 billion, beating Wall Street’s number by about $22 million. Excluding the foreign-exchange impact, sales rose 4%. Baxter added 13 cents to its full-year EPS guidance, now $1.59 to $1.67, up from $1.36 last year. The company said that its constant-currency sales growth should be 3%; it had previously guided 2% to 3%. For the second quarter, Baxter forecast earnings of 38 to 40 cents a share, topping analysts’ average estimate of 35 cents. It said that sales should grow 2% — even including the FX impact — where the Street had expected a slight decline. Baxter stock hit a new high of 44.75 in early trading on the stock market today . In afternoon trading, shares were up less than 1%, near 44. Baxter’s products, which include IV systems, dialysis machines and surgical equipment, are sold mainly to the hospital market, which has been looking strong this earnings season, according to Leerink analyst Danielle Antalffy. “This — now the third consecutive growth quarter in the U.S. after two consecutive quarters of low-single-digit declines — could serve as another encouraging data point, in addition to Johnson & Johnson ( JNJ ), St. Jude Medical ( STJ ) and Abbott Laboratories ( ABT ) (Q1 reports) last week, that supports a potential trend for improving U.S. procedure volumes overall,” Antalffy wrote in a research note. The fortunes of hospital stocks supports her view: The Medical-Hospitals group has been among the fastest-rising of IBD’s 197 industry groups, leaping from No. 191 to six weeks ago to No. 39 at present.

Medtronic Sales, Operating Margin Mar Otherwise Solid Quarter

Shares of medical-device giant Medtronic ( MDT ) dipped sharply Tuesday after its fiscal Q3 sales missed estimates, though earnings and guidance were in line with expectations. Medtronic’s earnings for the quarter ended Jan. 29 totaled $1.06 a share excluding one-time items, down 1% from the year-earlier quarter and matching the consensus number calculated by Thomson Reuters’ survey of analysts. Sales jumped 61% to $6.93 billion, though adjusted for last year’s buyout of Covidien, as well as foreign-exchange rates, sales increased just 6%. This was about $55 million below consensus. Medtronic affirmed its full-year guidance of $4.36 to $4.40 in EPS, which includes 45 to 50 cents of foreign-currency impact. It did not guide Q4 earnings but said sales should grow 5% to 5.5% excluding the foreign-currency impact, which it sees amounting to $180 million to $220 million. Leerink analyst Danielle Antalffy wrote that the sales miss was largely due to higher-than-expected foreign-exchange headwinds, but there were a few signs of trouble. “U.S. sales growth did slow a bit, coming in at 4% growth vs. our 6% projection and representing a deceleration from the 6% growth seen in (fiscal) Q2 2016 and the 14% growth seen in (fiscal) Q1 2016,” Antalffy wrote. “This slowing growth is likely in large part attributable to increasingly difficult comparables and, to us, doesn’t yet suggest an alarming signal of a broad-based slowdown. “Medtronic did deliver positive operating leverage quarter-over-quarter, with EBIT margins of 27.8% vs. 27.4% last quarter, but this improvement fell below guidance of 28.0%-28.5% and our 28.5% estimate. This now leaves the increasingly positive operating leverage story very much back-end-loaded, with Medtronic having to deliver Q4 operating margins of at least 33.5% to hit its prior guidance for 29%-31% as reported for full-year 2016.” Antalffy also noted that Medtronic’s competitors similarly missed sales estimates in the most recent quarter — among them St. Jude Medical ( STJ ), Boston Scientific ( BSX ) and Johnson & Johnson ( JNJ ) — making Medtronic’s quarter look good in comparison. Medtronic stock was down almost 5% in late-morning trading on the stock market today , near 74. The stock had been relatively buoyant during the market sell-off, closing Monday just a few percentage points below the 52-week high hit last March.

Intuitive Surgical Up, St. Jude Down On Prelim Q4

SAN FRANCISCO — Medical equipment makers Intuitive Surgical (ISRG) and St. Jude Medical (STJ) were moving in opposite directions on the stock market Wednesday after both issued preliminary Q4 results. Intuitive, maker of the da Vinci robotic surgery system, said that its Q4 revenue was about $677 million, up 12% from the year-earlier quarter and beating analysts’ consensus by $26 million. It did not provide guidance for 2016 overall but said that