Baxter Shares Aren’t Built For Speed

tdp2664
InvestorPlace
For investors, Baxter International  (NYSE:  BAX ) seems to have all the appeal of kissing your sister — an OK-looking sister, but still your sister. If you're looking for a health care stock to get your juices flowing, Baxter is probably not it. Unlike its health care brethren in the pharmaceutical and biotech businesses, Baxter is unlikely to make a dramatic discovery that will revolutionize disease treatment and boost its share price dramatically overnight.  At the same time, the turtle did win the race. So for investors looking for a nice, steady performer with some upside, Baxter is certainly worth a peek. The company is a lot more attractive now that it's overcome some recent product issues. Last May, Baxter shares were pummeled when the company was forced to recall 200,000 of its infusion pumps, thus incurring a huge special pretax charge. Literally overnight, Baxter shares dropped more than 30% to just north of $40.  Since that time, the company has recovered nicely and now trades near its 52-week high of $57. The company recently got a boost when it reported that first-quarter 2011 earnings topped expectations. With the outlook brightening, Baxter also raised its guidance for the second quarter and for the full year. However, revenue is expected to increase only 3%-4%, one of the reasons some analysts are a bit skeptical about the stock. Based just outside Chicago, Baxter makes products for people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions.  Revenue from the company's huge Medication Delivery business jumped 20% in the first quarter, thanks to hefty growth in intravenous and nutritional therapies, as well as its broad range of generic and pre-mixed injectable drugs. Baxter recently made a nice addition to this business by snagging Prism Pharmaceuticals, a specialty pharmaceutical company that has developed and received Food and Drug Administration approval for multiple doses of a drug typically administered to patients in extremely time-sensitive in critical care situations. The company says this unique product satisfies unmet clinical need, offers an opportunity to expand the current market and also has potential for application in additional markets outside the U.S. Geographic diversity is one of Baxter's strengths. For investors who like companies who cover the globe, Baxter might be just the ticket. More than 60% of the company's revenue is from outside the U.S. On the flip side, Baxter has been dinged by analysts for its dividend yield of 2.2%, a seemingly stingy return for a company with a market cap of nearly $33 billion. And even though the company has paid consistent dividends, it only started raising them annually in 2007. Another warning sign is that analysts who follow the company don't appear to be overwhelmed by its prospects. Most are ambivalent, giving the stock ratings like hold, neutral, average and equal weight. As we said, sort of like kissing your sister.