Baxter International Recalls Peritoneal Dialysis Solution - Analyst Blog

Baxter International Inc. (BAX) recalled a single lot of Dianeal PD-2 peritoneal dialysis solution with 1.5% dextrose 6000 mL (Ambu-Flex II) after receiving reports about the presence of a particulate matter, known as mold, resulting from a leak in the container. The news had a negative reaction on the market as shares of the company slid 0.5% to close at $67.57 yesterday.

Contamination of a solution with mold could lead to life-threatening fungal peritoneal infection or sepsis upon its intraperitoneal (IP) administration. The affected lot is C903799, with expiration date of May 2015, product code of L5B9710, and national drug code of 00941-0411-11.

Baxter distributed the product to dialysis centers, facilities, distributors, and patients in the U.S. between May 2013 and Jan 2014. It was packaged in flexible plastic containers.

Baxter sent a recall letter to customers requesting them to locate and remove the affected product from their facility. The company also sent a recall letter to patients, who received product from the affected lot, asking them to return it.  
Baxter posted a marginal 1.1% fall in adjusted net earnings to $692 million in the fourth quarter of 2013 from $700 million in the year-ago quarter. However, on per share basis, adjusted net earnings were flat at $1.26 compared with the year-ago level but beat the Zacks Consensus Estimate by a penny.

For full year 2013, net earnings inched up 2.0% to $2,567 million from $2,516 million a year ago. On per share basis, net earnings rose 3.1% to $4.67 from $4.53 in 2012 and were in line with the Zacks Consensus Estimate.
 
Revenues for the quarter went up 16.4% to $4,368 million globally and exceeded the Zacks Consensus Estimate of $4,249 million. Excluding the contribution from Gambro, revenues in the quarter grew 5% to $4.0 billion (or 6% excluding the impact of foreign currency).

For the first quarter of 2014, Baxter expects sales to grow between 13 and 14%, barring the impact of foreign currency. The company also expects adjusted earnings in the range of $1.06 to $1.09 per share in the quarter. The current Zacks Consensus Estimate for 2014-first quarter earnings is pegged at $1.09.
 
For full year 2014, BAX anticipates sales growth in the range of 9 to 10%, excluding the impact of foreign exchange. The company also expects adjusted earnings between $5.05 and $5.25 per share and operating cash flow of $3.5 billion for the year. The current Zacks Consensus Estimate of $5.13 for 2014 earnings lies within the guided range.

Currently, Baxter has a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical products industry include Enzymotec Ltd. (ENZY), Covidien plc (COV), and Stryker Corporation (SYK). Enzymotec retains a Zacks Rank #1 (Strong Buy), while both Covidien and Stryker carry a Zacks Rank #2 (Buy).
 

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