Baxter International Inc. (BAX) on Q2 2021 Results - Earnings Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to the Baxter International Second Quarter 2021 Earnings Conference Call. I would now like to turn the call over to Ms. Clare Trachtman, Vice President, Investor Relations at Baxter International. Ms. Trachtman, you may begin. Clare Trachtman: Good morning, and welcome to our second quarter 2021 earnings conference call. Joining me today are Joe Almeida, Baxter's Chairman and Chief Executive Officer; and Jay Saccaro, Baxter's Chief Financial Officer. Joe Almeida: Thank you, Clare. Good morning, everyone, and thank you for joining us. I'll begin with an overview of Baxter's second quarter results and ill share a few words about our upcoming investor conference. Jay will then provide a deeper dive in our financial performance and outlook. And we will wrap up with Q&A. Baxter delivered second quarter sales growth of 14% as reported, 9% on a constant currency basis and 8% operationally. Growth was driven primarily by the ongoing global recovery from the COVID-19 pandemic resulted in favorable performance comparisons for a number of our businesses versus the prior year, as it endemic affect the patient treatment dynamics and demand mix in the prior year. On the bottom line, second quarter adjusted earnings per share were $0.80, up 25% year-over-year and exceeding our original guidance. All three of our geographic segments contributed to the positive quarterly performance, the Americas and EMEA achieved high single digit growth and APAC achieved low double-digit growth, all at constant currency rates. While we are clearly experienced in recovery from the pandemic across all three of our geographies, the situation on the ground varies considerably by market. As always, we salute the healthcare workers who continue to face enormous challenges every day on the frontlines of care. I also want to express my personal gratitude to all the Baxter employees who tirelessly supported these clinicians and caregivers while helping to ensure we addressed the needs of patients across our vast life-sustaining portfolio. Jay Saccaro: Thanks, Joe and good morning, everyone. As Joe mentioned, we're pleased with our strong second quarter performance. Second quarter 2021 global sales of $3.1 billion advanced 14% on a reported basis, 9% on a constant currency basis and 8% on an operational basis. Sales growth this quarter reflects the ongoing recovery in hospital and surgical volumes, along with the benefit from COVID vaccines. We estimate these badges contributed just over 450 basis points of sales growth in the quarter. OUS sales of Caelyx/Doxil totaled approximately $30 million in the quarter. On the bottom line, adjusted earnings increased 25% to $0.80 per share, exceeding our guidance range, driven by disciplined operational execution and the lower than expected tax rate. Now I'll walk through performance by our regional segments and key product categories. Starting with our three regional segments. Sales in the Americas increased 8% on both the constant currency and operational basis. Sales in Europe, Middle East and Africa grew 8% on a constant currency basis and 5% an operational basis and sales in our Asia-Pac region advanced 10% on a constant currency basis and 9% operationally. Moving onto performance by key product category. Note that for this quarter constant currency growth is equal to operational sales growth for all global businesses, except for our pharmaceuticals business, for which we will provide both constant currency and operational growth adjusted for the acquisition of rights in select territories outside the U.S. Caelyx and Doxil. Global sales for Real Care were $964 million or flat on a constant currency basis. Performance in the quarter was driven by our PD business, where we observed both the sequential and year-over-year improvement in global patient volumes. This was partially offset by decline in international sales of in-center HD dialyzers, reflecting the impact from the pandemic as well as competitive dynamics. We continue to monitor the impact of excess mortality among ESRD patients and delays in new patient diagnoses resulting from the pandemic. Our expectation remains that PD patient volumes will continue to ramp over the course of the year, although the pace may vary by market. In particular, we are monitoring COVID resurgences in Asia-Pac and parts of Europe. Sales in Medication Delivery of $697 million increased 12% on a constant currency basis. Strong global growth in this business reflects the recovery in the patient hospital admissions in many markets following the height of the pandemic last year. We estimate that in the second quarter the rate of U.S. hospital admissions was down approximately 7% as compared to pre-COVID levels, a market improvement from the second quarter of 2020, which saw U.S. admissions down approximately 20%. Operator: Thank you. We will now begin the question-and-answer session. Our first question comes from the line of Bob Hopkins with Bank of America Securities. Bob Hopkins: Thank you and good morning. Can you hear me okay? Joe Almeida: Yes, we can Bob. Good morning. Bob Hopkins: Great. Good morning. So -- yeah, I just have two questions and I'll just state them upfront in the interest of time. So, I guess, first for, maybe for Jay, I was just wondering if you could flush out the Renal performance in the quarter a little bit more? And what happened internationally and how quickly you think Renal to get back to better growth rates? So, that's question number one. And then, for question number two is more strategic for Joe. Joe, I realize you won't talk about market speculation. But I do think it'd be helpful for investors to hear maybe a little bit of an update on your thoughts on M&A generally, and maybe talk about what the circumstances would have to be for you to pursue a larger deal. How important it is that M&A improved the company's growth rate, things of that nature, just thinking an update there, would be much appreciated. So, those are my two questions and thank you very much. Jay Saccaro: Great. I'll address the Renal question first from a Q2 performance standpoint, and then turn it over to Joe for the second question. Overall, as you mentioned, the U.S. had a solid performance in Renal growing 4%. We ended up -- and PD was a little bit in excess of that 5%, with the HD business slightly below that. And then internationally you're right, we had a decline in the quarter, which we do not expect to continue. There were a couple of drivers of that. One is, we've talked historically about patient census challenges and that being a headwind that we're facing and contending with this year, which has kind of disrupted the normal orderly cadence of patient growth that we see internationally. And that was pronounced in the second quarter. Our PD business actually slightly declined, so 1% decline in the quarter. We do expect that to return starting in the third quarter and the fourth quarter. And frankly, we've seen in certain markets delays in procedures of establishing new PD patients, like, for example, in Japan, along with this patient census issue, all of these things came together to impact the growth rate in the quarter. Like I say, in the second half of the year, we do expect to see an acceleration, and feel solid about that. And then, in the HD business, we did have some pricing competition on dialyzers. We see that from time to time. So, the HD business declined mid single digits, and we will expect that to normalize in the second half of the year. So, while the Renal business has been a fairly consistent performer for us internationally, and you look at that over a series of multiple quarters, I think you can expect -- you can gain some confidence in the second half of the year, we'll grow that business internationally, roughly 3%. I'll turn it over to Joe to address the other questions. Joe Almeida: Thank you, Jay. Let me give you how I think about M&A to answer your question, Bob. First is, size being a secondary conversation. First is strategically fit for the company. We look at areas of growth for the future. We look what is going to make a difference in the healthcare five to 10 years where this Baxter is going, now where this bucket's going. Some times we were getting attached to growth rates and things of where things are. We've got to look where things are going, and Baxter is doing a lot in connected health. And we need to make sure that we have the ability to deploy capital in that area, as well as adjacencies. Going into areas off no correlation to Baxter to create a new lack of this tool, presenting much more challenging environment for the company in terms of M&A, not impossible to do it, but it’s something that is more difficult. Second is how do we see returns? The returns are always the same. We look getting returns a way return to be above our cost of capital about few hundred basis points, as well as we look at ROIC very similarly on the five-year base post the deal. We look out so the ability for the company to generate cash flow and our ability to bring the company integrating Baxter, which I feel confident that we through our digital transformation have a much better ability of bringing companies in that a few years ago. And the third and last one is, is that not every deal is created the same, and we examine multiple opportunities at all times. So, the company has a significant amount of cash and it doesn't go against deals, it goes back to the shareholders in the form of -- in terms of buybacks, as we have done. You saw we just did some buyback this quarter and for the year we are around $600 million. So, this is how I think about M&A. Bob Hopkins: Great. Thank you, guys. Joe Almeida: Thanks, Bob. Operator: Robbie Marcus with JP Morgan is on the line with a question. Please state your question. Robbie Marcus: Great. Thanks. Appreciate it. Jay, maybe I could start with you. I wanted to touch on guidance. You guys had a really nice EPS piece in the quarter. You have admissions trending towards pre-COVID levels over the back part of the year. Maybe you could just walk us through the updated guidance and how you ended up where you did, especially on EPS? Jay Saccaro: Sure. You're right, Robbie. Thus far, we're seeing a fairly stable admissions environment relative to our expectations. Underlying our guidance, we're expecting roughly 98% of admissions in the United States in the fourth quarter of the year. We watched that, of course, very carefully and I've talked about the risk and the sensitivity around that in the past. And we're particularly watching, given the Delta variant, but feel solid that we've got our hands around this at this point. And so then, as we translate that to the rest of the P&L, let me talk first about a full year basis, and then maybe make some comments on the second half. On a full year basis, we are seeing some challenges in the pharmaceuticals business related to competition and pricing. And so, on a full year basis, it is probably $0.06 of a headwind from pharma, offset by $0.06 of a benefit from our BioPharma Solutions business, which is performing better than our expectation. So those items kind of -- sort of counteract each other. And then, we had roughly $0.08 or so on a full year basis of global supply chain costs, that we're contending with. And so, essentially, we're seeing things like freight and premium freight costs as roughly $0.03. We actually have a fairly substantial manufacturing facility in Columbia. We've had a couple of cents of impact from Columbia unrest, ensuring we're getting product to our patients and products out of the country in an expeditious manner. And then, of course, there's some purchase price variations, which there is some inflation in that -- rounding out the $0.08. But offsetting that, we have -- we're committed to really using resources efficiently as a company. And so, we're able to counteract the vast majority of that. So, roughly $0.07 of benefit from measures that we have in place, that are enhanced versus our expectations, really looking at all of the spending categories, and challenging ourselves to make sure that we're using resources as efficiently as possible. Of course, when we do those exercises, we don't touch things like quality or critical R&D programs, but we really do look hard at the cost base to ensure we're being efficient, and offsetting where possible. So, that's really the story on a full year basis. But if you think about it -- and then there's financial assumptions that kind of wash out. We had some benefit in the first half from a number of assumptions and then we have some headwinds in the second half. But if you look at it exclusively from a second half standpoint, I'll say that FX is actually $0.03 of impact. So, that is really one of the big drivers of the second half performance. We've seen dollar strengthening. And so that has an impact on our translation back of our overseas business. That's roughly $0.03. BPS and pharma again, kind of wash out in the second half. And then we have a couple of cents of supply chain expenses, but I think really the most notable impact of the second half is this foreign exchange impact on that, that we're contending with right now. Robbie Marcus: Great. And Jay, I don't know if you want to take this or Joe. I think it is worthwhile spending a little more time on the $0.06 pharma headwind. What's driving that, what drugs, what makes you feel better? You could overcome it in the second half, and just any detail, that would be great. Thanks. Joe Almeida: Robbie, when we think about pharma, what's the value proposition of our pharma business is complex formulations and delivery in novel ways. Our pre-mixes in ways that have not been yet launched or combination of both. So, we are in process of delivering in our portfolio. The conditions of the market have deteriorating themselves off pricing headwinds, as well as COVID with the patients that have not gone to a hospital and the budget of the pharmacists, right? So, when we look at this whole thing, where do we spend today? We still see that headwinds that that business has don't confuse the whole category that we have, which just has two very separate businesses. One is as our Anesthesia business which are gases and instead of gases and that has declined consistently over the last 24 months, because it back off delivery systems. Then you see geologists are using across the globe foot gas from our pharmaceutical business. So, , we just had three products are conditionally approved. We're going to be launching three in the next six to nine months. We are excited by that portfolio and follows the same recipe of difficult to formulate and novel ways of delivering. So, if you think about that, PD is still goodbusiness, has very, very, very strong and healthy profitability. So what we need to do is to make sure that our innovation wheel doesn't stop and we continue to bring products organic, and then sometimes inorganically to the portfolio to be able to augment the growth of this business and keep ahead of the competition. Baxter has put together very good group off on the scientists in the United States, as well as India and together, they are working 24 hours a day in tandem to be able to deliver on that. I'm still stand on that portfolio, understanding the headwinds that portfolio can have every so often as some drugs will go down in contribution, based on competition. But then, we're able to launch new products. Remember, we have 22 of new product launches this year, probably around half of them are pharmaceutical products. So, we do not see a long-term future for this business, but more so -- every so often issue that you have when you have competition coming into your market that has just happened in the last 12 months. Robbie Marcus: Appreciate it. Thank you. Joe Almeida: Thanks Robbie. Operator: Pito Chickering of Deutsche Bank is on the line with a question. Please state your question. Pito Chickering: Hey, good morning. Thanks for taking my questions. Two on Renal. The first one is, the U.S. grew sequentially by about $1 million. Can you walk us through sequential PD growth versus non-PD? And how much the January excess mortality from COVID impact that sequential growth. Joe Almeida: So, Pito, I will start and Jay will pick up from there. Our sequential growth has improved from Q1 to Q2 in the overall U.S. market from 3.3% to about 4% in Q2 and going then to peak about 6% in Q4 for a pretty good performance on the post 2020 year, which is -- which was really hit hard in terms of new patients and the death of patients on COVID. I would say that, the PD market is still very much a good market to be in, and it has grown above the overall renal dialysis business across the globe, particularly in the U.S. which still very optimistic on the vector of the growth, that despite all the happens in 2020, we're able to have growth this year and expect to return to a high single digit patient growth to double-digit patient growth probably towards the end of 2022, going into 2023. Clare Trachtman: Yeah. And Pito, just to add that basically by the end of the year, we would expect the dialysis population in the U.S. to grow just under a percent. So, it is starting to recover after being down more than 2%. Again, this is the treated dialysis population in 2020, so it will return to growth this year and then continue to grow even faster in 2022 and beyond. Pito Chickering: Okay. Great. And then, a follow-up question on the Renal OUS, how much did they impact that you guys saw in this quarter was from excess mortality from COVID, like mentioned to Bob that -- like it's normalized the back half of the year. I just wanted to understand how much is purely temporary, like the procedures in Japan for PD versus some more permanent nature. Jay Saccaro: Yeah. So, what I would say is, it is really a mix of those two items. And we don't differentiate -- we don't split that out for a number of different reasons, but understand those drivers internally. The 1% decline, we're going to expect to see in the second half of the year, 4% growth as we start to see procedures normalized. And then, we start to lap the headwind of the very unfortunate patient mortality situation. So, again, if you look at -- as I commented earlier, if you look at the international business on a rolling 12-month basis in PD and Renal internationally, it's a solid growth for us. We expect that story to continue moving forward. Pito Chickering: Great. Thanks so much. Jay Saccaro: Thank you. Operator: Vijay Kumar of Evercore ISI is on the line with a question. Please state your question. Vijay Kumar: Hey, guys. Thanks for taking my question. Maybe -- my first one, a high level, big picture question for Joe. Joe, when you think about the business pre-pandemic versus post-pandemic, at a very high level, has anything changed fundamentally for the business, whether when you look at your end markets, margin structure? And by fundamental, I mean, there are obviously some temporary issues here, but these all seem to be workable, solvable, temporal in nature, but fundamentally has anything changed, when you think about the pre-and-post-pandemic universe. Joe Almeida: Vijay, I think that there is changes in how patients are being treated and how hospitals are seeing the influx of patients. I -- when you think about 2019, you saw, and you see how we are looking at for the rest of the year. We see this year a recovery year, where new admissions towards the end of the year. They exit into 2022, will be probably a 100% -- 90% to 100% all going back to the admission flow rates that we've had before. So, if you think about the major dynamics of the market, I would say it's a move from the acute care to the less acute care. And what is the impact for Baxter? If you think about Baxter as healthcare supply company with products that are a must have, independent of your setting, we follow the patient with our products in many places. If you go to a less acute site, you will need a pump, no matter what the fluids you need or medicines, injectables versus you need things that are needed to feed that patient. To the home site, we have that advantage and have spoken about the PD advantage. That is a positive for the company, not only by the role in the U.S. with a kidney dialysis and transplant changes that were done during President Trump's tenure, but also the place to be if you have sick patients that don't want to go to acute sites or dialysis clinics. So that is a positive. When we look at what I see is temporary, the inflation that we're seeing and the disruption in supply chain, I think not only Baxter is working hard to offset that, but also I don't believe those are fundamental changes that will alter the going forward dynamic of our logistics costs, as well as raw material cost. We will face headwinds in this area. We have spoken about the costs of containers are very expensive, fuel, and everything else, we're offsetting that as you could see this quarter and we have done for the year and we plan to continue to do it. The thing is how do you see that? Is that a fundamental change in the cost structure? We don't think so. We think that that will eventually subside. But at the moment, we don't have that in our numbers. In our numbers what we have is us offsetting headwinds coming in from the cost point of view. Market-wise, as I said, there are chains of significant amount telehealth connecting the docs of information coming from ICUs. So, the better off -- we will be better off, but continue to develop our digital health products as we're doing to think about our Sharesource with a companion, with a mobile companion that we just launched earlier this year, TrueVue, in our CRRT, as well as half of the portfolio with the FDA to date, we've got our new pump, it is not a mechanical electrical pump, it’s actually software that is going with it, that will be installed in the hospitals networks as gateway to be able to manage traffic and bring information back and forth. So that's boat has shipped, that boat has sailed. There's no way to not be in the connected market going forward. Vijay Kumar: That's extremely helpful. Joe. Jay, one -- a quick one for you. You take a lot of pride in that free cash flows, obviously the pandemic, there has been a lot of moving thoughts, year-to-date free cash conversion sub 70%. I'm curious, what are temporal items here? And should we think of Baxter -- when should we think about Baxter getting back to being a premium free cash conversion company? Jay Saccaro: Thanks for the question, Vijay. As you know, Joe and I are both really focused on driving free cash flow and driving free cash flow performance sustainably. And frankly, we've made a series of decisions over the last couple of years to sub-optimize the base case to protect against severe situations that could emerge. All of these things were absolutely the right thing to do, carrying extra inventory into the pandemic. As we sit here today, carrying select inventory of incremental product, as we look at a hurricane season, which could be a challenge. And so, these things have -- we've had a little bit excess inventory relative to our normal expectations. As we move towards the end of the year, and as we've been able to improve the predictability of sales by product line in a post-pandemic world, we'll start to be able to optimize the cash flow a little bit more carefully and closely. And so, I think, as we move to 2022 and 2023, we'll start to see more normal years for cash flow. Obviously, 2020 was a huge anomaly. 2021 continues to be anomalous, because of, again, just really being sensitive to having enough product available to support patients in a very challenging situation. But as I said, I think as we emerged in 2022 and 2023, we'll be able to optimize the inventory a little bit better, continue our focus on accounts receivable. And then furthermore, on the days payable, really worked to optimize that working closely with our suppliers. And then, finally from a CapEx standpoint, there are certain investments that we always make and we'll continue to make those, especially those that support growth businesses like our PD business. So, we'll continue to look for those value creating opportunities and those exist. So, we'll have more CapEx and that will be a continued area for us of great investment. But I think 2022 starts to become a more normal year and then even more so in future beyond that. Vijay Kumar: That's helpful, Jay. Thank you, guys. Operator: Lawrence Biegelsen of Wells Fargo is on the line with a question. Please state your question. Lawrence Biegelsen: Good morning. Thanks for taking the question. One, on BPS, one on Novum IQ. Obviously, Joe, BPS was really strong in this quarter. I'd love to understand the contribution from the COVID vaccine, and how sustainable that is? How should we think about -- is that still $50 million to $100 million annual opportunity? And Joe, you signed a contract last year with a partner on a non-COVID vaccine. So, when can we start to see that contributing? Just trying to understand the outlook for BPS, and I had one follow-up. Joe Almeida: The outlook has been improving, because the necessity for vaccine. So, right now, we're looking at about a north of a $100 million this year of contribution from BPS. Clare Trachtman: Specific to the COVID vaccines. Joe Almeida: Specifically COVID vaccine, not BPS as a business is larger than that, but just BPS vaccine north of a $100 million. Lawrence Biegelsen: And in terms of the sustainability of that Joe, I guess there's no way to comment that at this point. Joe Almeida: It’s not, Larry. Yeah. We -- on one side we hope that we don't ever need to produce another file of vaccine. So disease goes away and the world is back to normal. On the other hand, we're doing what we can to help the world get through this. So, I would say that you probably going to have some procedure production in 2022, because as you can see, it was overseas, but a few weeks ago, and the scarcity of vaccine is remarkable. So, there's still a lot of places in the world that don't have vaccines. And I think eventually those vaccines will reach there. So, we're not making a prediction 2022, but we think that there will be residual production in 2022 for vaccine. Clare Trachtman: And we do have some of our out for 2022 as well. Lawrence Biegelsen: Thank you for that. And on Novum IQ, Joe, obviously, it's a very important product for you. I'm wondering if you'll talk a little bit about the nature of the questions you received and the timing of the response and your confidence into 2021 approval. Thanks for taking the questions. Joe Almeida: Larry, I'll give you an update overall, but in nature, the questions is a little too much -- not going to get into it. But I would say all the questions are answerable. I know the questions are not out of this world in terms of complexity, put them on a piece of paper, and get that to the FDA. I don't comment, I'll let you know on the call and outside the call that I don't comment on behalf of the agency. The agents will do what agents will do. What we can do is, make sure that our engineers and scientists and the regulatory folks are focused on as we have a lot of people focus on getting those answers to the FDA. We hope that they will be happy with the answers, and we can have the product launch this year as we are planning at the moment. I'm also want to just make sure that you all know we have a pretty good demand for our spectrum pump, our current pump. So, it's not all or nothing. We do have really good demand for our pump, very large contracts coming about. So, I just want to make sure that we feel very comfortable with where we are with himself our technical responses to the FDA. We think we have it. We have very happy with the design of the pump and the future that holds because a very different platform that will hit the markets when approved, and hopefully bring this industry with a different level of technology, but nevertheless, Baxter has three different groups of pumps, Novum IQ, Spectrum Version 9, as well as the pump that is yet to be approved by the FDA. Lawrence Biegelsen: Thank you, Joe. Operator: Danielle Antalffy of SVB Leerink is on the line with a question. Please state your question. Danielle Antalffy: Hi. Good morning, everyone. Thanks so much for taking the question. Just to follow-up to Vijay's question. Jay, this is for you on what's fundamentally changed. You did have pretty strong SG&A control this quarter. And just wondering, is that something that's sustainable going forward? And should we be thinking about that as a more meaningful lever going forward as we head into the analyst meeting, and I have one more higher level follow-up Jay Saccaro: Sure. I think, the controls that we had in place, we were pleased that we were able to save a substantial amount in second quarter, roughly $0.06 relative to our expectations on the OpEx line. And as we moved to the full year, there's probably a couple more cents relative to our expectations. We'll always look to optimize spending for sure. And what we were pleased that we were able to drive an impact in the face of a challenging worldwide supply chain environment in the second quarter. But there is part of the savings that we experienced this year that are related to a slower resumption of activity. And so, as we look at the second quarter, we had sort of anticipated a very substantial increase in SG&A. You'll know that we did have a nice size increase in SG&A, but it was just not quite at the pace that we anticipated. So, we'll expect that to resume. Here's what I would say about SG&A and other spending categories and cost of goods going forward, at the Investor Day, we'll talk about things like the work that Jim Borzi is doing to really optimize manufacturing and supply chain, and really taking a cutting edge approach in that arena. And then, the other thing that we'll tell you about is the digital transformation that we're undertaking, and that will have a nice impact in terms of really spending across the company. And I think that's something that we'll feature prominently. In the meantime, we were pleased to drive a short-term result. But I don't think all the changes that we're making are the ones that we'll be talking about with you when we get together in September. Danielle Antalffy: Understood. Thanks for that, Jay. And then, Joe, I guess the question is for you, and again, back to -- shifting fundamentals, you mentioned site of care, things like that. How are pricing conversations or contracting conversations different between the two sites of care, talking more ambulatory or outpatient versus hospital and inpatient? And is that something that we need to consider as we look over the long-term for Baxter? Thanks so much Joe Almeida: Danielle, I would say that a lot of these sites are owned by a large hospital systems. They're not just independent sites. The configuration of products, and some of those sites are different than using the hospitals. So price points may differ for products used in non-acute or stepped down -- significant step derivatives that are not part of a hospital campus. But that is not -- there's no two different conversations going on. We believe that our products are priced consistently across customers. And we negotiate every single concept with the intent to have as much beneficial so we can get that integrated supply chain for the hospital. So, if you think about our negotiations are all about the class of products and quality and availability of products and evidently price is a big deal, no best price usually wins. So, I don't see tremendous distinction. Danielle Antalffy: Okay. Thank you. Joe Almeida: You are welcome. Operator: Matt Miksic of Credit Suisse is on the line with a question. Please state your question. Matt Miksic: Hi. Thank you so much. I wanted to ask follow-up for Jay, on some of the environmental trends that you're seeing. And then, I had one question for Joe as well, if I could. Jay, in your remarks you mentioned this sort of sustained high level of surgical volume performance you're expecting in the U.S. throughout the rest of the year. And I'm just wondering where -- what gives you that confidence or visibility that that's kind of where will stay and I mentioned one follow-up. Jay Saccaro: Sure. Yeah. In my prepared remarks, we commented that we're seeing roughly at historic levels of surgical procedures, roughly 100% of prior level. We have some line of sight in the short term, but our crystal ball gets murky as we look towards year-end. That's very clear. And so, I would say that, one point of procedure volume in the U.S. is roughly half a million dollars of impact per month. And so that's something that we watch carefully. I think when we put together the sales guidance for the year, we have the ability to withstand a little bit of softness in surgical procedures and admissions as it relates to Delta variant. But this is an uncertainty that we're contending with, not only on the surgical procedures side, but also on the admissions side. When I've talked historically about a lot of the work that we've done in terms of forecasting and modeling, and I think we've done a really good job kind of relating our business to some of these fundamental drivers, but you're right. There are -- this is a volatile world that we're living in today. And we'll have to watch carefully, as we move through the rest of the year, if the virus change its course substantially. At this point, we don't have any reason to believe that will be the case, and feel good about the numbers upside, the downside risk, not enormous. So, I think we're in okay shape. Matt Miksic: That's great. And then, just one follow-up for Joe. I think to Bob's question you had mentioned that size was not so much of a consideration or determinant. But I'd love to get your sense of -- is two things on the M&A environment. One is sort of asset pricing or the challenges that you face in making a med device or supplies acquisition in this environment. It's been a part of the conversation for Baxter for a number of years. And then also, the balance that you see, the pluses and minuses of putting more capital work in a large deal, the risks associated with that and continuing with some of the tuck-in acquisitions that you've done before. Joe Almeida: If you think about tuck-in acquisition as they always going to be there, because it's a way for us to augment our product lines and adjacencies. We just announced actually one today, and that is a good way. We don't have the kind of product we need that kind of product to compete. So there's a really quick, good thing we saw in our pharmaceutical business with Doxil and Caelyx, so you need to need it. But then you think about where the future of healthcare is going, where the confluences of the force is coming about, how do we look at our portfolio going forward and what would be a good compliment for the portfolio? So, the size doesn't play a role, obviously if there's something enormous and unachievable, we don't discuss that. But the size by itself will never be a determinant. As I said before, is a strategic, a strategy -- a strategic field. Second is the returns. The third would be our ability to integrate well. And if we don't find anything to deploy the cash, we deploy the cash bask to the shareholders. So, don't think about size ever being a determinant, think about the strategic fit and future of healthcare. Matt Miksic: Got it. Thank you. Joe Almeida: Thank you. Operator: Last question comes from the line of Joanne Wuensch with Citigroup. Please state your question. Joanne Wuensch: Thank you for taking my question. Just a couple of pieces of clarification. What was the COVID vaccine benefit in the quarter on a dollar basis? Clare Trachtman: It was just over $40 million. Joanne Wuensch: I'm sorry, $30 million Clare Trachtman: $40 million, 4 0, just for the reporting. Joanne Wuensch: Excellent. And how much Novum IQ at dollars and cents is in the current guidance? Jay Saccaro: We had approximately a little north of $25 million in the fourth quarter. Joanne Wuensch: Thank you. And just to confirm, you're expecting hospital volumes to be at pre-COVID levels exiting the year. Jay Saccaro: No. At 98% in the fourth quarter. And so, if we were to split it at the very end of the year, the run rate would be basically at the prior year level. So, into Q1 of next year. Joanne Wuensch: Excellent. Thank you so much. I appreciate it and have a great … Joe Almeida: I just want to make sure that you all know that our -- we're not predictors of disease here neither infection rate. So, we do the best we can and putting our models in place. We based our numbers on that. We will all expect to hopefully the Delta variant will be contained in most places in the world and we move on. But at the moment, the admissions in U.S. cost per 98% exiting the year, hoping 2022 at a 100%. Things can change, as you can see by the infection rates, but the death is too much smaller than there were before. So, we do the best we can when looking at this numbers is what we think is going to happen. Clare Trachtman: Thank you. That will conclude our call. Operator: Ladies and gentlemen, that concludes today's conference call with Baxter International. Thank you for participating.
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Stifel Nicolaus Analyst Sets New Price Target for Baxter International Inc. (BAX)

Rick Wise of Stifel Nicolaus Sets New Price Target for Baxter International Inc. (BAX:NYSE)

On May 2, 2024, Rick Wise of Stifel Nicolaus set a new price target for Baxter International Inc. (BAX:NYSE) at $44, marking a potential upside of approximately 19.81% from its price at the time of the announcement, which was $36.725. This adjustment was highlighted in a report published by TheFly, detailing the reasons behind the revised target from a previous $50. This new price target comes in the wake of Baxter International's recent financial performance, which has shown both strengths and areas of concern that investors and analysts are closely watching.

Baxter International reported quarterly earnings of $0.65 per share, surpassing the Zacks Consensus Estimate of $0.61 per share. This performance not only exceeded expectations but also marked an improvement from the $0.59 per share earned a year ago, showcasing an earnings surprise of 6.56%. Such consistent outperformance in earnings per share (EPS) is a testament to Baxter's operational efficiency and its ability to adapt to market conditions. This is further evidenced by the company's track record of beating consensus EPS estimates in three out of the last four quarters, highlighting its reliability in delivering shareholder value.

In terms of revenue, Baxter International announced figures of $3.59 billion for the quarter ending March 2024. This not only beat the Zacks Consensus Estimate by 1.20% but also indicated the company's capability to exceed revenue expectations consistently, having done so three times in the last four quarters. However, it's noteworthy that this quarter's revenue saw a slight decline from the $3.65 billion reported in the same period the previous year. This dip might raise concerns about growth sustainability, yet the company's ability to still outperform estimates may alleviate some of these worries.

Despite these financial achievements, Baxter International Inc. experienced a decrease in its stock price, closing at $36.91, which represents a decline of $3.43 or approximately 8.5%. This volatility in stock price, with fluctuations between a low of $36.20 and a high of $39.15 throughout the trading day, reflects the market's reaction to both the company's financial performance and broader economic factors. With a market capitalization of around $18.75 billion and a trading volume of 10,740,697 shares, Baxter International remains a significant player in the drug and medical device industry, even as it navigates through the challenges and opportunities presented by the market.

The setting of a new price target by Rick Wise of Stifel Nicolaus at $44, considering the company's recent performance and market position, suggests a belief in Baxter International's potential for recovery and growth. This optimism is grounded in the company's consistent ability to exceed earnings and revenue expectations, despite facing a slight revenue decline and stock price volatility. As Baxter International continues to adapt and evolve in the competitive landscape of the drug and medical device industry, investors and analysts alike will be keenly watching its next moves.