Baxter International

(BAX) - Get Report

shares rose 4% on Wednesday after Morgan Stanley upgraded the company to overweight from equal weight, telling investors the company is finally turning the corner.

For the last two years, Baxter shares have languished as the company attempts to restructure its operations, replacing its CEO and CFO in mid-April in hopes of finally getting it right. While the company still faces risks, Morgan Stanley analyst Glenn Reicin said the new management team is moving the company in the right direction as a key business, plasma protein therapies, finally shows signs of stabilizing.

"Perhaps the most crucial element of our these is that the newly appointed CEO, Bob Parkinson, appears to actively be taking stock of the business and is prepared to take whatever actions are appropriate to get the company back on track," said the analyst, in his upgrade. (Morgan Stanley does and seeks to do business with the companies covered in research reports.)

In reaction, shares of Baxter rose $1.32 to $34.28.

The company has taken some definite strides to curb rising inventory levels of its plasma products, reducing output by 2.6 million liters a year. Though Reicin said the company may have to reduce output further to keep levels from rising again, he concluded, after attending a plasma forum hosted by the Plasma Proteins Therapeutics Association, that demand for plasma products may finally be picking up after a long and steady decline.

With plasma prices expected to increase -- and Baxter actively working to pare down costs and cut jobs -- Reicin said the company will be able to absorb rising overhead costs.

"We believe the risk of further business deterioration has been significantly reduced," said Reicin.