(By Balaseshan) Deutsche Bank analyst Kristen Stewart downgraded rating of Baxter International Inc. (NYSE:BAX) to "Hold" from "Buy" with $63 price target.
Stewart decided to revisit Baxter given the outperformance of the stock this year, the publication of her Global FITT hemophilia report, and the upcoming analyst day.
The analyst believes the market is already viewing the analyst meeting as a positive catalyst and as she moves beyond it, recombinant competition concerns are likely to become more of an overhang as competitors release data in the coming months.
Alzheimer's is a wildcard; the analyst doesn't feel comfortable using that to justify being more positive. Though she sees the potential for some upside to the current price, particularly around the analyst meeting, it is no longer enough to support a "Buy" rating and hence she downgraded the rating.
Stewart expects management to present a positive view on its businesses and pipeline, though believes the market is already anticipating it. Management will also outline its long-range plan. Over the 2012-17 period, she expects sales and EPS CAGRs of 5% and 8%, respectively.
Baxter may also provide some color on 2013. The analyst reviewed her model and now expects 2013 EPS of $4.80 (versus $4.87) reflecting higher pension and R&D spending to support the pipeline.
Baxter's hemophilia business is 22% of sales but the analyst estimates 33% of profits due to the profitability of the recombinant business. As she highlight in Global FITT report, Baxter could see competition from a number of new products over the next 5 years.
The analyst expects long-acting Factor VIII programs to have success and expects Baxter to lose market share, though Baxter's pipeline products (rFIX, rvWF, rFVIIa, long-acting rFVIII) should help to offset.
BAX is trading up 0.36% at $61.23 on Monday.