Market Overview

Morgan Stanley Finds A Few Reasons To Double Upgrade Baxter

Morgan Stanley Finds A Few Reasons To Double Upgrade Baxter

Shares of Baxter International Inc (NYSE: BAX) are trading at a valuation that implies low growth, but Morgan Stanley sees three catalysts ahead that will likely result in top-and-bottom line acceleration into 2020.

The Analyst

Morgan Stanley's David Lewis upgraded Baxter from Underweight to Overweight with a price target lifted from $66 to $77.

The Thesis

Baxter, a global medical products company, underperformed its medtech peers in 2018 but faces three key catalysts ahead to spur growth, Lewis said in a note.

First, the Medication Delivery and Nutrition businesses should benefit from continued stable pricing and some clinical practices to control usage showing signs of easing. Hospital customers should return to prior contractual arrangements, which were previously suspended by Baxter during supply shortages. A more friendly environment should result 3 to 4 percent growth in Medication Delivery and 2 to 3 percent growth in Nutrition versus expectations for a 2 percent decline for all of 2018.

Second, Baxter boasts the most flexible balance sheet among its large cap peers highlighted by 0.2 times net debt to EBITDA and an improving free cash flow model, the analyst wrote in the note. The company can deploy capital through tuck-in and medium-sized M&A deals to help drive growth and through share repurchases were likely "aggressive" late last year.

Finally, the stock's valuation of 13 times 2019 EBITDA implies a 3 to 4 percent weighted average market growth rate (WAMGR) and doesn't reflect the potential for the company to return to prior WAMGR rates of 4 to 5 percent in 2020 and beyond. In turn, this should help support multiple expansion.

Price Action

Shares of Baxter were trading around $65.26 Wednesday afternoon.

Related Links:

10 Biggest Price Target Changes For Wednesday

Benzinga's Top Upgrades, Downgrades For January 2

Photo courtesy of Baxter.

Latest Ratings for BAX

Jul 2020Raymond JamesMaintainsOutperform
Jul 2020Morgan StanleyMaintainsEqual-Weight
Jun 2020OppenheimerInitiates Coverage OnOutperform

View More Analyst Ratings for BAX
View the Latest Analyst Ratings


Related Articles (BAX)

View Comments and Join the Discussion!

Posted-In: David Lewis hospitals Medtech Morgan StanleyAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

PRTKHC Wainwright & Co.Maintains19.0
MCRBHC Wainwright & Co.Maintains41.0
EOLSHC Wainwright & Co.Maintains8.0
PRTSSmall Cap Consumer ResearchMaintains16.0
FIXXHC Wainwright & Co.Maintains30.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at