Baxter Drops on Lower Guidance

We had two more earnings reports from our Buy List this morning. I’ll start with the good. Reynolds American (RAI), the tobacco company, reported Q1 earnings of $1.11 per share which was four cents better than expectations. Revenue grew by 3.4% which was also better than the Street’s expectations. More importantly, Reynolds reaffirmed its full-year forecast of $4.80 to $5 a share, so we’re talking about a forward P/E of around 11. The stock also pays a very rich dividend of 90 cents a quarter which translates to a yield of 6.4%. Reynolds continues to be a very good buy.
The major blow to the Buy List comes today from Baxter International (BAX). The earnings report wasn’t so bad, 93 cents a share which was inline. The problem was that they lowered full-year expectations from the previous range $4.20 to $4.28 per share to $3.92 and $4 per share. For Q2, BAX sees earnings ranging between 90 and 93 cents per share. The Street was expecting $1.06 per share. Ouch! This is a very disappointing report.
Finally, Netflix (NFLX) continues to embarrass me and anyone else with common sense. The stock is up 14% this morning. The stock reminds me of a mighty ocean-going vessel steaming its way through the chilly waters of the North Atlantic. Nothing can stop it now!

Posted by Eddy Elfenbein on April 22nd, 2010 at 10:16 am

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.