This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Baxter International Hiding in Plain Sight

Baxter gets less Wall Street coverage than most big names in health care. Baxter's market cap is dwarfed by Abbott's and J&J's, and it is smaller than all Big Pharma companies -- foreign and domestic -- except Schering-Plough (SGP).

Baxter also gets less sell-side analyst attention than assorted biotech companies who have few or no products, little or virtually no revenue and modest or miniscule market caps. Examples, according to Thomson Reuters data, include Neurocrine BioSciences (NBIX), Vertex Pharmaceuticals (VRTX), Medarex (MEDX) and ZymoGenetics (ZGEN).

By most accounts, analysts ignoring Baxter are missing an interesting story.

The credit for Baxter's revival goes to Robert Parkinson Jr., a former Abbott executive who had been dean of the Loyola University of Chicago's School of Business Administration before joining Baxter in April 2004. He replaced Harry Kraemer Jr., who became CEO in 1999 and added the role of chairman in 2000.

"Parkinson has done a nice job of making this a more efficient business," Stralow says.

During Kraemer's tenure, Baxter emphasized aggressive growth, which was fine with Wall Street until it couldn't make good on hefty financial projections, says James B. Shein, a professor of management and strategy at Northwestern University's Kellogg School of Management.

"Considering this industry, it wasn't realistic," says Shein, Baxter "delivered pretty good results during most of Kraemer's tenure," Shein says, adding that Kraemer "took some unfair hits for things that happened."

Baxter revised financial forecasts in late 2002 and 2003, caused primarily by greater competition. By mid-2003, Baxter was closing some plasma-collection centers, firing 5% of its work force and further cutting its estimates. By late 2003, Baxter issued another reduced earnings forecast. In January 2004, Kraemer said he would resign.

When Parkinson assumed control, "he pushed for more focused results," Shein says. "He held people more accountable for results. He said Baxter had to make sure everything works well before we emphasize growth."

Parkinson put more home-office control over foreign subsidiaries "which were almost totally independent," and he instituted procedures to secure more timely payments from customers, Shein adds. "He focused more on cash and less on growth for the sake of growth."

Future growth should come, in part, from what William Blair & Co. cites as significant increases in R&D spending over the last two years. Biosciences holds the most promise, says Stralow. "They focus on what they do best," she adds. "Growth will be an internal story rather than through acquisitions."
4 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ABT $38.10 -1.17%
BAX $45.12 1.64%
JNJ $112.22 -0.42%
AAPL $94.19 -1.04%
FB $118.06 0.54%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs