Barron's Recommendation Boosts Baxter (BAX) Shares

In this weekend's edition of Barron's, Baxter International (NYSE: BAX) was highlighted as a healthcare stock which may offer some much-needed returns for struggling retail investors.

The article boasts Baxter as one of the few large-cap companies which reported double-digit earnings last year, and is expected to do that feat once again in '09. Barron's says Baxter could reach as high as $65 by year-end '09, given "strong earnings growth, margin expansion and continuing share buybacks." The piece also points out that management's current full-year earnings growth estimate of 10-12% could be conservative, according to some bulls. Further, the stock currently trades at about 14x estimated FY09 earnings, in-line with historical trough multiples in the range of 13-15x.

Barron's likes that these improvements have come amid a period of increasing R&D spending: since 2004, expenses in this area have doubled to about $1 billion this year.

Baxter currently receives about 44% of its sales, or about $5.3 billion, from its biosciences unit, while its medication-delivery group, which dominates the IV solutions market, brings in about $4.6 billion in sales, or 37% of its total revenue.

The Barron's article mentions that Baxter receives about 60% of its sales from overseas, meaning that foreign exchange will be an issue this year. However, Barron's concludes the piece by admitting that such an issue seems small "compared with the huge potential for biotherapy breakthroughs..."

Investors seem to be buying shares of Baxter this morning on the Barron's recommendation. With the broader markets down about 2%, Baxter is currently up 3% to $52.44.

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