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Unexpectedly poor sales in high-margin markets and lower-than-expected prices for divested assets caused

Baxter International

(BAX) - Get Baxter International Inc. Report

to lower its fourth-quarter and full-year earnings guidance Tuesday.

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The medical products company expects to earn 62 cents to 65 cents from continuing operations in the current quarter, including a gain of 3 cents a share from the sale of a Britain-based vaccine company. Sales are expected to be up 8% to 10% from a year ago.

Analysts surveyed by Thomson First Call were expecting earnings of 68 cents a share on sales of $2.5 billion, roughly 11% above the year-ago sales level.

Fourth-quarter sales growth reflects higher sales of Baxter's recombinant factor VII product and medication delivery products. While gross margin will be up from the third quarter, it's being squeezed by a bad geographic mix and the lower-than-expected asset-sale gains.

The fourth-quarter shortfall brings Baxter's full-year 2003 guidance to $1.52 to $1.55 a share, well short of the $2.20 a share the company predicted it would make at the beginning of the year. The shares are trading roughly where they were when that prediction was made, having largely missed out in the broader market's rally.

Baxter shares were recently down $1, or 3.2%, to $29.90 in Instinet premarket trading.