NEW YORK (TheStreet) -- Shares of Baxter International Inc (BAX) - Get Baxter International Inc. Report were climbing, up 0.53% to $72.02 in early afternoon trading on Thursday, after Jim Cramer explained why he thinks the company has "real value" on CNBC'sMad Money show Wednesday night.
TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio said shares of the medical supplies giant been held back, but has room to run.
He added that it has been a tough year for Baxter, but a turnaround may be near now that the company is set to spin off its bioscience division.
"Once Baxter spins off its biosciences unit, it will be a much cleaner and simpler story," Cramer said.
Baxter announced it will spin off its bioscience division as a company called Baxalta, which will trade under the symbol "BXLT" on the New York Stock Exchange.
Baxter will retain a 19.5% stake in Baxalta after the spin off, which is scheduled to be completed by July 1.
Once the spin-off is complete, Cramer noted that the new Baxter will be easy to value.
It will be known as the medical supplies company, which is also easier to understand than the current hybrid company of medial supplies and biotech, Cramer explained.
Deerfield, Ill.-based Baxter is a global, diversified healthcare company that develops, manufactures and markets products that sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions.
The company operates in two segments including bioscience and medical products.
Separately, TheStreet Ratings team rates BAXTER INTERNATIONAL INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate BAXTER INTERNATIONAL INC (BAX) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Health Care Equipment & Supplies industry and the overall market, BAXTER INTERNATIONAL INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for BAXTER INTERNATIONAL INC is rather high; currently it is at 54.25%. Regardless of BAX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BAX's net profit margin of 11.42% compares favorably to the industry average.
- BAXTER INTERNATIONAL INC's earnings per share declined by 17.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, BAXTER INTERNATIONAL INC reported lower earnings of $3.46 versus $3.65 in the prior year. This year, the market expects an improvement in earnings ($3.92 versus $3.46).
- BAX, with its decline in revenue, underperformed when compared the industry average of 21.7%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: BAX Ratings Report