Investing Ideas

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Consider Baxter: Its products don't go out of style

07-18-2009

From: BloggingStocks

I'm reiterating my Buy rating for Baxter (NYSE: BAX) first recommended on March 13, 2009 at a price of $51.16.

Baxter's near-recession-proof story remains intact. Baxter, a maker of a variety of medical products across three divisions, including drugs and vaccines, dialysis equipment, and IV supplies, should record a FY2009 revenue increase of 2-4%, led by demand for recombinants, plasma proteins, and antibody therapies in its bioscience unit.

Slower growth is seen in its medication delivery unit, but Baxter has done a good job focusing on high-margin businesses, divesting low-margin lines, and eliminating excess manufacturing capacity.

Further, Baxter's buy of a hemofiltration product line from Edwards Lifesciences (NYSE: EW) should reinvigorate the company's renal care business. The FY2009/FY2010 EPS estimates for BAX are $3.77 to $4.24.

Stock Analysis: Baxter is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in BAX now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your BAX position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $37.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.