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Baxter Raises Guidance As Hospital Market Rebounds; Stock Hits High

Shares of medical-product maker Baxter International ( BAX ) hit an all-time high Tuesday after the company beat Q1 estimates and raised its guidance. Baxter’s earnings, excluding one-time items, rose 6% over the year-earlier quarter to 36 cents a share, beating analysts’ consensus by seven cents, according to Thomson Reuters. Sales declined 1% to $2.38 billion, beating Wall Street’s number by about $22 million. Excluding the foreign-exchange impact, sales rose 4%. Baxter added 13 cents to its full-year EPS guidance, now $1.59 to $1.67, up from $1.36 last year. The company said that its constant-currency sales growth should be 3%; it had previously guided 2% to 3%. For the second quarter, Baxter forecast earnings of 38 to 40 cents a share, topping analysts’ average estimate of 35 cents. It said that sales should grow 2% — even including the FX impact — where the Street had expected a slight decline. Baxter stock hit a new high of 44.75 in early trading on the stock market today . In afternoon trading, shares were up less than 1%, near 44. Baxter’s products, which include IV systems, dialysis machines and surgical equipment, are sold mainly to the hospital market, which has been looking strong this earnings season, according to Leerink analyst Danielle Antalffy. “This — now the third consecutive growth quarter in the U.S. after two consecutive quarters of low-single-digit declines — could serve as another encouraging data point, in addition to Johnson & Johnson ( JNJ ), St. Jude Medical ( STJ ) and Abbott Laboratories ( ABT ) (Q1 reports) last week, that supports a potential trend for improving U.S. procedure volumes overall,” Antalffy wrote in a research note. The fortunes of hospital stocks supports her view: The Medical-Hospitals group has been among the fastest-rising of IBD’s 197 industry groups, leaping from No. 191 to six weeks ago to No. 39 at present.

Eli Lilly Q1 Sales Beat Views, But Earnings Miss As Expenses Mount

Big pharma Eli Lilly ( LLY ) issued mixed first-quarter earnings and guidance Tuesday, sending its stock down in early trading. Lilly’s earnings, excluding one-time items, shrank 5% from the year-earlier quarter to 83 cents a share, missing analysts’ consensus by 2 cents, according to Thomson Reuters. Revenue rose 5% to $4.87 billion, beating consensus by $45 million. Lilly added 5 cents to its 2016 EPS guidance range, now $2.68 to $2.78. It also raised its sales guidance slightly to $20.6 billion to $21.1 billion. At the same time, it shaved a percentage point off its gross-margin guidance, now 76%, as it also lifted its guidance for R&D and sales, general and administrative spending. Lilly stock was down nearly 2% in morning trading on the stock market today , below 77. Improved foreign-exchange rates were responsible for much of the upside, along with a 5-cent-a-share tax benefit in Q1. At the same time, the bottom line was hit by rising R&D expenses, including a $55 million milestone payment to biotech partner Incyte ( INCY ) upon the submission for approval of their jointly developed drug baricitinib. On the level of individual products, diabetes drug Humalog provided the biggest surprise, with its $606 million in Q1 sales falling 11% from the prior year and missing consensus by $100 million, according to Evercore ISI. Lilly said demand for the drug had actually increased, but so had rebates and discounts that Lilly negotiated with payers. Lilly said it does not expect the downtrend to continue the rest of the year. Revenue from a newer diabetes drug, Jardiance, doubled compared with last year, though since Lilly splits the take with partner Boehringer Ingelheim, it only received $38 million in Q1. U.S. sales beat expectations, and Lilly said it’s taking more share of the growing SGLT2 class of diabetes drugs, perhaps accounting for the underperformance of Johnson & Johnson ‘s ( JNJ ) SGLT2 drug Invokana, as shown in J&J’s Q1 report last week. Leerink analyst Seamus Fernandez wrote that while there were various upsides and downsides to the report, “we expect a limited impact as investor concerns about a significant Q1 miss diminish, and the focus shifts to abemaciclib data at ASCO (the American Society of Clinical Oncology meeting in June) and the conclusion of Expedition 3 (trial of solanezumab in Alzheimer’s disease) in Q4 2016,” he wrote in his research note.

Intuitive Surgical Q1 Impresses Wall Street, As Stock Hits New High

Surgical-robot maker Intuitive Surgical ( ISRG ) received multiple price target hikes from Wall Street, as its stock hit a new high Wednesday, following its Q1 earnings report late Tuesday. As IBD reported, Intuitive Surgical’s Q1 earnings beat estimates , but what really interested analysts was the quarter’s 17% procedure growth. Intuitive Surgical normally sells only about 100 of its pricey da Vinci robotic systems per quarter, so surgical procedures using the company’s consumable accessories and services are key to steady revenue. Management raised procedure-growth guidance for the year to 12% to 14%, from the previous 9% to 12%. Operating expenses increased, and Intuitive Surgical’s management also raised its opex guidance for the year to 12% to 15% of revenue, up from 9% to 13% previously. However, it likewise raised its gross-margin guidance to 69% to 70%, from 68% to 69.5%. Intuitive Surgical is on IBD’s Big Cap 20. Who else makes the grade? “Intuitive Surgical’s impressive Q1 procedure growth is consistent with our recent positive general surgeon checks,” wrote RBC Capital Markets analyst Brandon Henry as he raised his price target to 640 from 610 while maintaining a sector perform rating. “While Intuitive Surgical is accelerating operating expense spend, we believe these investments should drive increased future robotics adoption and help the company maintain its superior position in the robotics market, despite upcoming competition.” The company has no competitors at present, but Medtronic ( MDT ), TransEnterix ( TRXC ) and Johnson & Johnson ( JNJ ) partnering with Alphabet ‘s ( GOOGL ) Verily division are all developing their own robotic surgery systems. Leerink analyst Richard Newitter lifted his Intuitive Surgical price target to 710 from 700 while maintaining an outperform rating. “A now stronger outlook for Urology/GYN and general surgery gave management confidence to raise ’16 procedure guidance,” Newitter wrote in his research note. “Also, management seems to be talking more aggressively about da Vinci use in thoracic, a procedure area we think may be around the corner as an emerging growth driver.” Piper Jaffray analyst Matt O’Brien raised his price target to 610 from 550. He rates the stock neutral. Intuitive Surgical stock hit a record high of 654.88 early on the stock market today , pushing it up 20% for the year. In morning trading, shares were up 4.5% near 652.