Why Baxter International (BAX) Stock Hit an All-Time High Today (Update)

Update (4:10 p.m.): Updated with Thursday market close information.

NEW YORK (TheStreet) -- Baxter International  (BAX) hit an all-time high of $81 as of 11:50 a.m. on Thursday after the company announced it pans to split into two separate businesses by mid-2015 pending approval from Baxter's board of directors.

One company will focus on biopharmaceuticals, while the other will focus on medical products. Baxter's biopharmaceuticals business includes hemophilia and other bleeding disorder treatments, as well as blood plasma therapies that treat immune deficiencies. This section of Baxter's business generated revenue of approximately $6 billion in 2013, and the new, separate business will be named at some point in the future.

Ludwig N. Hantson, Ph.D., who currently serves as BioScience president, will serve as CEO of this new biopharmaceuticals company, while Baxter director Wayne T. Hockmeyer will become its chairman in a non-executive capacity.

The medical products business includes drug delivery mechanisms, nutritional therapies, intravenous solutions, anesthetics and surgery products. It generated more than $9 billion in revenue in 2013 and will maintain the Baxter International name. This company will include the $2.76 billion acquisition of Gambro AB, which makes kidney dialysis products.

Baxter chairman and CEO Robert L. Parkinson Jr. will act as chairman and CEO of the medical products company.

The separate companies will both have headquarters in northern Illinois.

The stock closed up 3.9% to $72.81, up $2.73 from its previous close of $70.08, on Thursday. More than 18.16 million shares changed hands, well above its average volume of 3,225,460.

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TheStreet Ratings team rates BAXTER INTERNATIONAL INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate BAXTER INTERNATIONAL INC (BAX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, expanding profit margins and notable return on equity. We feel these 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 revenue growth came in higher than the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 16.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $1,083.00 million or 14.60% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.24%.
  • The gross profit margin for BAXTER INTERNATIONAL INC is rather high; currently it is at 55.24%. 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, the net profit margin of 7.46% trails the industry average.
  • BAXTER INTERNATIONAL INC's earnings per share declined by 33.7% 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 $3.65 versus $4.18 in the prior year. This year, the market expects an improvement in earnings ($5.14 versus $3.65).
  • You can view the full analysis from the report here: BAX Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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