Baxter International (BAX) currently derives 58% of total revenues from international operations. Therefore, a strengthening U.S. dollar can hurt the company’s international revenues and subsequently its bottom-line.
Also, Baxter reported an 80 basis-point contraction in gross margin in the first quarter. The company has also lowered its fiscal 2010 sales, earnings per share and cash flow guidance.
Finally, the company faces significant product recall issues and has also lowered its sales, earnings per share and cash flow outlook for fiscal 2010. This prompted us to downgrade the stock to Underperform with a target price of $41.Zacks Investment Research
