Baxter International Outperforms Expectations in Q4 2024 Earnings
Baxter International Inc. (BAX) announced fourth-quarter 2024 adjusted earnings per share (EPS) of 58 cents. This result surpassed the Zacks Consensus Estimate of 52 cents by 11.5%. However, there was a decline of 10.8% compared to the previous year’s earnings, primarily due to rising costs and expenses.
On a GAAP basis, Baxter reported a loss of 95 cents per share, compared to a profit of 43 cents during the same quarter last year. This significant loss stemmed from special items including a Front Line Care goodwill impairment charge and costs associated with business optimization, Hurricane Helene, and separation-related expenses.
When looking at adjusted EPS from continuing operations, which includes segments like Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals, the company reported 49 cents, rising from 43 cents a year ago.
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Revenue Performance
Baxter’s revenues from continuing operations reached $2.75 billion, a slight increase of 0.9% reported and 2% at constant currency. This figure was 3.4% higher than the Zacks Consensus Estimate.
Following the positive earnings news, BAX shares rose 8.4% in pre-market trading. However, the stock has experienced a 14.8% drop over the last six months, while the medical and dental supplies industry grew by 9.2% during the same timeframe. The broader S&P 500 Index increased by 10% in that period.
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Segment Overview
Baxter has completed its transformation plan, announced in February 2023, concluding with the sale of its Kidney Care business last month. This streamlined approach is expected to open new avenues for improving healthcare delivery and driving profitable growth.
The new operating model integrates Baxter’s previously diverse nine-business structure into four focused global segments, a change that began reporting in the third quarter of 2023.
Medical Products & Therapies
This segment, which includes Advanced Surgery and Infusion Therapies & Technologies, generated $1.31 billion in sales, remaining nearly stable year over year, with a 1% rise at constant currency. Robust sales from the Novum IQ infusion pump and Advanced Surgery products contributed positively, yet sales of IV solutions suffered due to Hurricane Helene.
Sales of Infusion Therapies and Technologies totaled $1.02 billion, reflecting a decrease of 2% year over year, while Advanced Surgery sales reached $292 million, growing 5% year over year.
Healthcare Systems and Technologies
This segment, which includes categories such as Front Line Care and Care & Connectivity Solutions, achieved total sales of $784 million, down 1% year over year at constant currency. Sales were driven by new and upgraded patient support systems but were hampered by supply chain issues and market exits.
Sales from the Front Line Care category reached $280 million, an 8% drop year over year, while Care & Connectivity Solutions saw sales of $504 million, up 2% year over year.
Pharmaceuticals
This segment, which includes Injectables & Anesthesia and Drug Compounding, generated $643 million in sales, up 8% from the previous year. The growth was fueled by strong demand for Drug Compounding services and new launches.
Injectables and Anesthesia sales totaled $383 million, a 7% increase year over year, while Drug Compounding sales rose to $260 million, up 10% year over year.
Other
This segment’s revenues amounted to $12 million, reflecting a 33% decline year over year.
Profit Margin Analysis
Baxter reported an adjusted gross profit of $1.23 billion, which is a modest increase of 0.7% from the previous year. However, its adjusted gross margin fell by 10 basis points to 44.5% of revenues.
Selling, general, and administrative expenses increased to $761 million, an 11.4% rise from last year. Research and development expenses surged to $211 million, up 66.1% year over year.
Adjusted operating income from continuing operations was $297 million, down 10% year over year, which meant a drop of 130 basis points in the adjusted operating margin to 10.8%.
Outlook for 2025
Baxter provided guidance for the first quarter and full-year 2025 expectations.
In the first quarter, the company projects sales from continuing operations to grow by 3-4% and adjusted EPS ranging from 47-50 cents. The Zacks Consensus Estimate for sales and EPS stands at $2.62 billion and 52 cents, respectively.
For the full year 2025, Baxter expects a sales growth rate of 5-6% and an adjusted EPS in the range of $2.45 to $2.55. The consensus estimate for total sales is anticipated at $11.24 billion, indicating a 6.5% improvement year over year, while the adjusted EPS consensus stands at $2.47.
Baxter International Inc. Price, Consensus, and EPS Surprise
Baxter International Inc. price-consensus-eps-surprise-chart | Baxter International Inc. Quote
Overall Analysis
Baxter’s Fourth Quarter Results Exceed Expectations Amid Strategic Changes
Baxter’s Positive Performance and Strategic Moves
Baxter closed out the fourth quarter on a strong note, surpassing both earnings and sales expectations. While declining margins are a concern, improvements are anticipated due to a transformational plan that involves spinning off its Kidney Care and BioPharma Solutions businesses. This initiative aims for a simpler operating model that responds faster to market changes and enhances innovation for patients.
The $3.4 billion sale of its Kidney Care division, along with the previous sale of BioPharma Solutions and a new vertical operating model, is set to boost operational efficiency and financial flexibility. Baxter plans to use the proceeds to pay down debt. With reduced financial pressure and better cash flow, the company is well-positioned to prioritize innovation and grow in key healthcare areas. Leadership changes, including a newly appointed CEO, will guide this next phase of strategic execution, fostering sustainable growth and long-term value.
Resilience After Hurricane Helene
Baxter’s swift recovery from Hurricane Helene has ensured minimal disruption for 2025. All manufacturing operations at North Cove have returned to pre-hurricane levels, ensuring continuity in supply. Effective crisis management, resilient infrastructure, and proactive stakeholder coordination have established a strong foundation for stable operations and growth in the upcoming year.
Innovative Products Leading Future Growth
Recent product launches and FDA approvals position Baxter for robust growth in 2025 and beyond. The Novum IQ infusion pumps improve hospital efficiency, while Clinolipid’s new indications expand Baxter’s role in pediatric nutrition. The Vest APX airway clearance system enhances respiratory care, and ten new injectable pharmaceuticals solidify its presence in critical care, anti-infectives, pain management, and oncology. These developments align with Baxter’s strategic transformation, emphasizing high-value, patient-centered solutions.
Market Ranking and Competing Stocks
As of now, Baxter holds a Zacks Rank of #3 (Hold). Below are some better-ranked stocks from the same industry.
Aveanna Healthcare (AVAH), boasting a Zacks Rank of #1 (Strong Buy), has an estimated earnings growth rate of 666.7% for 2025. You can view the full list of today’s Zacks #1 Rank stocks here.
In the past six months, AVAH has delivered a trailing four-quarter average earnings surprise of 135.00%. The company is set to release its fourth-quarter results in March, though its shares have fallen 4% during this period, compared to the industry’s 2.1% growth.
Penumbra (PEN), rated Zacks Rank #2 (Buy), anticipated a growth rate of 32.4% for 2025. It has beaten earnings estimates in three of the last four quarters, with an average surprise of 10.54%. Fourth-quarter results are expected on February 18. PEN shares have risen 37.6%, while the industry has seen a slight decline of 0.1% over the last six months.
Masimo (MASI), also rated Zacks Rank #2, has an estimated growth of 9.5% for 2025. MASI has exceeded earnings estimates in each of the last four quarters, posting an average surprise of 17.10%. Its shares have surged by 47%, while the industry has stagnated at a 0.1% decline over the past half-year. The company plans to announce its fourth-quarter results on February 25.
Five Stocks with Doubling Potential
Five stocks have been singled out by a Zacks expert as top picks expected to gain +100% or more in 2024. While not every selection will succeed, past recommendations have achieved marked gains of +143.0%, +175.9%, +498.3%, and +673.0%.
The majority of the stocks in this report are currently under the radar on Wall Street, representing an excellent entry point for investors.
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Baxter International Inc. (BAX): Free Stock Analysis Report
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