Barclays Bullish On Baxter International, $52 Price Target

Barclays reinstated coverage of Baxter International Inc BAX with an Overweight rating and $52 price target as it sees upside to long-term growth and margin targets.

Since spinning off the Baxalta biopharma business in May 2015, the company has delivered a series of beats and raises due to its focus on R&D investment in the medtech business and better cost controls.

Baxter expects 2020 operating margin (OM) of 17-18 percent (unlevered), driven by cost savings, new products, and portfolio management.

Barclays noted that post-spinoff, Baxter raised its long term targets by 350 bps at the midpoint, and topped its initial 2016 guidance by 200 bps (current 12 percent vs. initial 10 percent OM).

"Organically, we think BAX can top this goal and using the balance sheet could add to OM and EPS," analyst Matthew Taylor wrote in a note.

Taylor expects the solid MSD growth to continue and should come from key products such as Sigma Spectrum, PD cyclers, CRRT, anesthesia, and biosurgery. Further, the company has other growth/margin accretive assets including pharma, anesthesia, and nutrition.

"While we understand the valuation pushback on BAX, we think investors are missing the medium-term margin and M&A potential, along with the strength of BAX's new products, which we think will resolve this disparity," Taylor added.