On Friday, Baxter International Inc. (NYSE:BAX) saw its stock rating downgraded by TD (TSX:TD) Cowen from Buy to Hold with a maintained shares target of $40.00.
The decision follows a 9% drop in Baxter's share price last Thursday, which was attributed to disappointing performance in the Hospital Services and Technologies (HST) segment, despite the company posting better-than-expected first-quarter results and modestly raising its full-year guidance.
The company has kept its 2024 projections for 3-4% constant currency (CC) revenue growth, excluding its Kidney Care business, despite the first-quarter HST weakness and a revised lower growth forecast for HST at around 0%, down from the previous estimate of approximately 3%.
The analyst indicated that last Thursday's significant market reaction to Baxter's performance suggests investors are growing impatient with the company's growth pace, especially in light of the anticipated benefits from the Hillrom acquisition.
Baxter remains committed to a second-half separation of its Kidney Care business, and during the first-quarter earnings call on Thursday, the company indicated it expects to achieve 4% CC growth after the divestiture.
However, the analyst expressed skepticism that investors will respond favorably to a growth rate marginally higher than the current 3-4% range. The downgrade to Hold reflects a wait-and-see approach as the market seeks more clarity on Baxter's potential to reach and sustain a 5% or higher sales growth rate.
InvestingPro Insights
As Baxter International Inc. (NYSE:BAX) navigates market challenges and investor expectations, real-time data from InvestingPro provides a deeper financial perspective on the company's current standing. With a market capitalization of $18.32 billion and a trailing P/E ratio that appears deeply negative at -356.46, the financial picture is complex. However, the dividend yield stands at a solid 3.23%, reflecting the company's commitment to returning value to shareholders, underscored by its history of raising dividends for 7 consecutive years and maintaining payments for 54 consecutive years.
InvestingPro Tips suggest that despite Baxter's recent stock performance, the company is a prominent player in the Healthcare Equipment & Supplies industry, with net income expected to grow this year. Moreover, the stock's low price volatility could appeal to risk-averse investors. For those looking for more nuanced analysis, InvestingPro offers additional tips – there are 7 more detailed insights available for Baxter, which can be accessed by subscribing to the service. Utilize the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
With Baxter's next earnings date set for July 25, 2024, and analysts predicting the company will be profitable this year, investors may find value in keeping an eye on the company's performance as it works to meet its growth targets and complete the planned separation of its Kidney Care business.
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