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Baxter's ramp up in R&D spurs tumble in 4th quarter earnings

by Britt Vogel
Jan 23, 2014

Baxter International Inc. posted a fourth-quarter drop in earnings Thursday, largely due to higher research and development costs targeting new blood products and therapies.

The Deerfield-based medical products company earned $326 million, or 59 cents per diluted share, a 34 percent decline from earnings of $494 million, or 89 cents per diluted share, for the year ago period. Baxter greatly underperformed Bloomberg Finance LP’s surveyed analysts’ earnings-per-diluted-share expectation of $1.22.

Net sales in the fourth-quarter, meanwhile, jumped 16 percent to $4.37 billion from $3.75 billion in 2012.

“[Research and development] for the full year approached $1.1 billion, a record level for the company,” CFO Robert Hombach said in a conference call with investors Thursday, “and continues to be driven by investments we are making to advance a number of programs in our pipeline.”

He named company R&D programs in hematology, onocology and immunology, as well as investments in renal therapy. Hombach said the company expects 2014 to be a peak year for capital spending, with R&D growing in the low single digits.

Cowen and Co. equity analysts, Joshua Jennings and Christopher Hamblett, based respectively in New York and Boston, said in a research note released Thursday, that Baxter, “came in above the Street and our estimates and were driven by outperformances from Hemophilia Spec Pharma, Biopharma Solutions and Fluid Systems.”

For all of 2013, Baxter earned $2.01 billion, or $3.66 earnings per diluted share, a 13 percent decrease from 2012 revenues of $2.33 billion, or $4.18 earnings per diluted share. Wall Street’s consensus estimate was $4.30 according to analysts surveyed by Bloomberg.

Baxter shares closed Thursday at $69.00, down 74 cents or 1.06 percent from Wednesday’s closing price of $69.74.