Baxter International Inc., which has altered its earnings forecasts four times in the last 15 months, may stop issuing quarterly guidance.
The Deerfield-based medical products giant said it is examining its investor relations policy on providing guidance, which allows Wall Street analysts and large institutional investors to better gauge the company’s performance.
But Baxter has had difficulty with its forecasts in the last year, blaming most changes on a volatile market for blood therapies. On Tuesday, Baxter again dismayed investors by lowering its forecast for fourth-quarter earnings to a range of 62 cents to 65 cents from a range of 74 cents to 84 cents.
This time, Baxter blamed the downward revision on lower-than-expected income from the sale of its stake in a British vaccinemaker and “an unfavorable geographic mix.”
The unpredictability of Baxter’s forecasts is unnerving investors and analysts who are questioning the credibility of Chief Executive Harry Kraemer and his management team in the wake of the string of alterations.
“The risk premium associated with Baxter has once again gone up, leaving management with the difficult task of proving to the street that any guidance that it gives has credibility,” Ben Andrew, an analyst with William Blair & Co. in Chicago, said in a report on Baxter issued Wednesday.
But Baxter said it would not be alone should it cease issuing earnings guidance. Other companies have stopped issuing quarterly guidance, especially when they run into unpredictable market conditions.
In the telecommunications industry, for example, several companies were embarrassed in recent years when they had to do multiple revisions of their forecasts. Among their problems was an inability to predict demand for their telecom equipment from month to month.
In Baxter’s case, the company’s blood-therapies business is finding it difficult to make money off such products as its treatment for immune system disorders. An oversupply in the U.S. and other markets has caused prices to drop more than 20 percent.
For now, Baxter appears torn because it wants to keep investors informed about its direction, but the challenging market for blood therapies is making that difficult.
“It’s something we are taking into consideration,” Baxter spokeswoman Deborah Spak said.
Meanwhile, the company’s revisions have drawn the attention of the U.S. Securities and Exchange Commission, which in July requested information about the company’s changing forecasts.
Kraemer was unavailable for comment, but he is expected to discuss the guidance policy during the company’s next earnings call with analysts on Jan. 29, when the company’s fourth-quarter and full-year 2003 results will be released.