CORRECTED-UPDATE 4-Baxter net beats Street view

(Corrects to remove extraneous words from paragraph two)

* Q2 shr 96 cents vs 85 cents year ago; beats Street view

* Quarterly sales dip 2 pct; foreign exchange rates weigh

* Raises full-year outlook

* First H1N1 vaccine batch ready by late July/early August

* Shares up 3.6 percent (Adds conference call, stock movement, byline)

By Debra Sherman

CHICAGO, July 16 (Reuters) - Baxter International Inc (BAX.N), which makes blood therapy, kidney dialysis products and vaccines, reported higher-than-expected quarterly net earnings on Thursday, as improved margins helped outweigh the negative impact of foreign exchange rates.

The company also raised its profit outlook for the full year and disclosed details about its H1N1 pandemic flu vaccine program, calling it a "material opportunity" while saying it's too soon to speculate on the financial upside.

Baxter shares were up nearly 4 percent after reaching their highest level since March.

The stock rallied after the company reported its net earnings rose to $587 million, or 96 cents per share, in the second quarter from $544 million, or 85 cents per share, a year earlier.

The average forecast on Wall Street was for a profit of 94 cents per share, according to Reuters Estimates.

Sales fell 2 percent to $3.12 billion from $3.19 billion, but would have risen 8 percent if not for the stronger dollar, which reduces the value of revenue from overseas.

Revenue in Baxter's Bioscience business rose 2 percent to $1.4 billion. Excluding foreign exchange, revenue was up 13 percent, buoyed by growth in antibody therapies and other specialty plasma therapeutics.

Revenue fell 3 percent to $1.1 billion in Medication Delivery and dropped 8 percent to $550 million in Renal.

"Here's another quarter where things are just clicking along," said Edward Jones analyst Aaron Vaughn, who has a "buy" rating on the stock. "They don't seem to have been impacted by macro economy, and we're looking more of the same."