US group Baxter International saw its earnings leap 26% for the first quarter of the year, primarily on improved margins and a lower tax rate.

The company, which makes blood therapy products and drug delivery systems, booked income of $282 million, or $0.43 per share, versus $224 million, or $0.36 a share, for the year-ago period. This beat the $0.41 average forecast from analysts polled by Thomson Financial.

Sales inched up 1% to $2.4 billion, in line with general expectations and helped by an 11% rise to $1 billion in revenues from group’s Bioscience business, which makes treatments for the blood disorder haemophilia. This helped offset the impact of foreign exchange, generic competition and the exit of lower-margin businesses, Baxter said. In addition, it also helped buffer the loss of sales from its Colleague Infusion Pump, which was taken off the shelves last year following links to a number of patient injuries and up to seven deaths.

For the second quarter, Baxter is expecting to generate earnings of $0.54 to $0.56, excluding extraordinary items, and the company has raised its full-year profit outlook to $2.10-$2.16 from its original $2.08-$2.16 target. Cash flow from is forecast at $1.9 billion.

“We are extremely pleased with our first quarter financial results,” said John Greisch, Baxter's Chief Financial Officer. “Our strong financial performance reflects the value of our diversified portfolio and our ability to meet or exceed our commitments while improving the financial profile of the company.” And investors certainly seemed to agree: shares closed up 4% yesterday at $38.51.