While the coronavirus pandemic has reduced the number of elective surgical procedures and impacted the availability of certain materials, Baxter International Inc. (BAX) has partly offset this impact through its broad product portfolio, asserts Jasper Hellweg, an analyst with Argus Research.
Meanwhile, companies such as Baxter with experience in diagnostic testing, vaccines, and antiviral medicines, as well as suppliers of protective equipment and other hospital products, could benefit from efforts to contain the coronavirus pandemic.
We believe that Baxter’s efforts to stock up on key materials, work with new suppliers, and open new production lines will help to offset the negative effects of the pandemic. The company has also continued to grow through acquisitions, partnerships, and pipeline developments.
It recently received emergency use authorization from the FDA for its Oxiris filter set to treat patients with confirmed COVID-19 infections, and reported positive results in a trial of its Starling Fluid Management Monitoring System in the treatment of septic shock patients.
While septic shock affects roughly 47 million people per year, resulting in at least 11 million deaths, the study is particularly timely given the risk of septic shock from COVID-19 infection. Baxter’s Starling system is approved in more than 30 markets globally.
From a technical standpoint, the shares have recovered nicely since mid-March, rising from a low of about $69 per share. Additionally, the stock is trading at a relative strength index of 49, suggesting that it could move significantly higher before becoming overbought.
Despite the uncertain of impact of COVID-19 on the company’s 2020 results, we believe that Baxter’s response to the pandemic and the essential nature of its business, as well as its recent dividend hike and pipeline progress warrant a "buy" rating.
Our revised target of $97, raised from $95, implies a total potential return, including the dividend, of more than 12% from current levels.
