Inside Baxter’s Newly Added Risk Factors

Baxter International (BAX) is an American multinational medical products company. It has been in business for 90 years. The company has again been included in the Dow Jones Sustainability Indices. Baxter recently completed the acquisition of Hillrom as it expands and transforms to meet the challenges of an evolving global healthcare landscape.

The company plans to distribute a quarterly cash dividend of $0.28 per share on January 3. Baxter stock currently offers a dividend yield of 1.3%.

Baxter’s earnings report shows revenue rose 9% year-over-year to $3.2 billion in Q3 2021, matching the consensus estimate. It posted adjusted EPS of $1.02, beating the consensus estimate of $0.94. For Q4, the company anticipates adjusted EPS in the range of $1.00 to $1.04, compared to the consensus estimate of $1.02.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Baxter.

Risk Factors

According to the new TipRanks Risk Factors tool, Baxter’s main risk category is Finance and Corporate, representing 32% of the total 25 risks identified for the stock. Legal and Regulatory and Macro and Political are the next two major risk categories, accounting for 20% and 16% of the total risks, respectively. Baxter has recently updated its profile with three new Finance and Corporate risk factors.

The company estimates that it will incur $11.4 billion in debt related to the Hillrom acquisition. As a result, the acquisition will substantially increase Baxter’s debt and the company cautions that it may have less cash available for investments, dividend payments, or share repurchases. Further, the company warns that its high debt level could put it at a competitive disadvantage compared to companies with less debt.

Baxter informs investors that it may not achieve the anticipated benefits of the Hillrom acquisition. It says that the success of the acquisition will depend on its ability to properly integrate Hillrom into its system. But Baxter mentions that the integration process may run into many challenges that disrupt its normal operations, result in unexpected expenses, or strain the relationships with market participants and regulators.

The Finance and Corporate risk factor’s sector average is 29%, compared to Baxter’s 32%. Baxter’s stock has gained about 6% year-to-date.

Analysts’ Take

Cowen analyst Joshua Jennings recently maintained a Buy rating on Baxter stock with a price target of $98, which suggests 14.86% upside potential. Jennings noted that Baxter completed the Hillrom acquisition ahead of schedule.

Consensus among analysts is a Strong Buy based on 3 Buys and 1 Hold. The average Baxter International price target of $96 implies 12.52% upside potential to current levels.