Baxter 2Q Profit Up 7.9% On Margin Gains; EPS View Raised

Baxter International Inc. (BAX) posted a stronger-than-expected 7.9% rise in second-quarter profit on higher margins but sales unexpectedly fell as currency impacts masked solid product growth.

The medical-products maker also boosted its 2009 earnings forecast to $3.76 to $3.80 a share from April's narrowed $3.72 to $3.78 a share. It still expects sales to be flat for the year amid currency impacts and projected third-quarter earnings of 95 cents to 97 cents, bracketing analysts' expectations.

Baxter's therapies target serious diseases that can't be ignored - such as cancer, immune disorders and trauma - insulating the company somewhat from the economy's woes. But lately investors have been closely watching Baxter's largest unit, bioscience, amid fears a recession-induced rise in plasma collections - people in the U.S. people collect a small fee for donations - will cause a glut that crushes prices.

Baxter reported a second-quarter profit of $587 million, or 96 cents a share, up from $544 million, or 85 cents a share, a year earlier. The company in April projected 93 cents to 95 cents.

Gross margin rose to 52.4% from 51%.

Net sales dropped 2.1% to $3.12 billion, but rose 8% excluding currency fluctuations. Analysts surveyed by Thomson Reuters, on average, predicted $3.19 billion. International sales fell 8%, but rose 9% excluding currency impacts. U.S. sales rose 7%.

Bioscience posted a 2% sales rise, or 13% minus foreign exchange, helped by strong results for antibody therapies and other specialty plasma therapeutics. Medication-delivery sales fell 3%, but rose 8% excluding currency impacts.

Shares closed Wednesday at $53.09 and were inactive premarket.

-By Mike Barris, Dow Jones Newswires; 201-416-2330; [e-mail]