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BAXTER INTERNATIONAL INC (BAX) Q1 2025 Earnings Summary

Executive Summary

  • Baxter delivered a clean beat: revenue $2.63B (+5% reported/operational) and adjusted EPS $0.55, both above guidance and Street consensus; Q2 guide sets reported sales +4–5% and adj. EPS $0.59–$0.63 .
  • Full-year 2025 guidance raised: reported sales growth to 7–8% (from 5–6%) and adjusted EPS to $2.47–$2.55 (raised low end) amid tariff headwinds and FX dilution .
  • Segment strength: HST and MPT outperformed on U.S. capital orders/backlog (CCS +20% orders) and IV pumps/nutrition; Pharma steady with specialty injectables offsetting anesthesia softness .
  • Margin/FCF mixed: adjusted operating margin improved y/y to 14.9%, but GAAP gross margin fell and FCF was -$221M as Baxter rebuilt IV supply/inventory; TSA income helped offset stranded costs .
  • Near-term catalysts: continued Novum IQ adoption, HST backlog execution, and clarity on tariff mitigation; risks include anesthesia softness, tariff magnitude, and capital spending caution .

What Went Well and What Went Wrong

  • What Went Well

    • HST strength: CCS U.S. capital orders +20%, competitive wins in PSS; management: “We’ve got a healthy backlog… strong order growth and a lot of competitive account wins” .
    • MPT beat: double-digit U.S. infusion systems growth as Novum IQ rollout continues; nutrition mid-single-digit growth on alt-site momentum and supply recovery .
    • Raised FY guide: reported sales 7–8% and adjusted EPS $2.47–$2.55, while Q2 EPS guide $0.59–$0.63 signals confidence despite tariffs .

  • What Went Wrong

    • GAAP margin compression: gross margin % fell y/y to 32.8% (-580 bps), operating margin 2.2%; Helene, product reserves, legal and amortization weighed on GAAP .
    • Free cash flow negative: FCF from continuing ops -$221M as Baxter rebuilt IV supply and inventory following Helene .
    • Pharma anesthesia decline and international CCS softness; management remains cautious on capital environment and tariffs (net impact ~$60–$70M in 2025, majority 2H) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$2.699 $2.753 $2.625
GAAP Diluted EPS – Continuing Ops ($)$0.12 ($0.95) $0.13
Adjusted Diluted EPS – Continuing Ops ($)$0.49 $0.58 $0.55
Adjusted Gross Margin %43.7% 44.5% 41.8%
Adjusted Operating Margin %14.5% 15.2% 14.9%
Segment Sales ($USD Millions)Q1 2024Q1 2025YoY (% Actual)
Medical Products & Therapies (MPT)1,229 1,262 3%
Healthcare Systems & Technologies (HST)667 704 6%
Pharmaceuticals578 581 1%
Other16 78 388%
Total – Continuing Ops2,490 2,625 5%
Division Detail ($USD Millions)Q1 2024Q1 2025YoY (% Actual)
Infusion Therapies & Technologies966 994 3%
Advanced Surgery263 268 2%
Care & Connectivity Solutions (CCS)402 427 6%
Front Line Care (FLC)265 277 5%
Injectables & Anesthesia328 335 2%
Drug Compounding250 246 (2%)
Segment Operating Income ($USD Millions)Q1 2024Q1 2025
MPT – OI ($)227 244
MPT – OI Margin %18.5% 19.3%
HST – OI ($)67 93
HST – OI Margin %10.0% 13.2%
Pharma – OI ($)78 63
Pharma – OI Margin %13.5% 10.8%
KPIs (Continuing Ops)Q1 2024Q1 2025
Cash from Operations ($USD Millions)$67 ($99)
Capital Expenditures ($USD Millions)($110) ($122)
Free Cash Flow ($USD Millions)($43) ($221)
TSA Income & Reimbursements ($USD Millions)—$40
U.S. vs International ($USD Millions)Q1 2024 U.S.Q1 2024 Int’lQ1 2025 U.S.Q1 2025 Int’l
Infusion Therapies & Technologies526 440 584 410
Advanced Surgery147 116 145 123
CCS278 124 316 111
FLC195 70 202 75
Injectables & Anesthesia191 137 195 140
Drug Compounding— 250 — 246
Pharmaceuticals Total191 387 195 386
Total – Continuing Ops1,348 1,142 1,490 1,135

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reported Sales GrowthFY 20255%–6% 7%–8% Raised
Operational Sales GrowthFY 20254%–5% 4%–5% Maintained
Adjusted Diluted EPSFY 2025$2.45–$2.55 $2.47–$2.55 Raised low end
Reported Sales GrowthQ2 2025—4%–5% New
Operational Sales GrowthQ2 2025—1%–2% New
Adjusted Diluted EPSQ2 2025—$0.59–$0.63 New
Adjusted Operating MarginFY 2025~16.5% 16%–16.5% Slightly narrowed
TSA IncomeFY 2025—$140–$150M New detail
Non-Operating Expense (Interest+Other)FY 2025—$220–$240M New detail
Tax RateFY 2025—~19%–19.5% New detail
Diluted SharesFY 2025—~515M New detail
Dividend2025Prior cadence$0.17/share quarterly (payable Jul 1; $0.68 annualized) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Hurricane Helene & IV solutionsRestarted high-throughput IV line; expected 4Q impact; recovery progressing North Cove back to pre-hurricane levels; allocations lifted by mid-May; some distributor restocking (~1.5 pts to total company) Improving supply; temporary inventory rebuild
TariffsNot explicit in Q3; caution on macro Net impact ~$60–$70M in 2025; majority in 2H; mitigation via suppliers, routes, targeted pricing, exemptions Headwind; mitigation underway
HST capital environmentQ4: CCS strong U.S., international softness; FLC challenging CCS U.S. orders +20%; backlog strong; cautious on capital spending outlook Building momentum; cautious macro
Novum IQ infusion pumpsQ3: successful U.S. LVP launch Low single-digit share gains; robust innovation pipeline Adoption rising
Pharma mixQ3: Drug Compounding strong; Injectables timing/supply constraints Specialty injectables mid-single-digit growth; anesthesia lower; compounding low-single-digit growth Mixed; anesthesia stabilizing later
AI/Connected CareN/A in Q3; Q4 product launches in respiratory Launched Voalte Linq voice assistant “Scotty”; driving workflow automation New tech initiative
Corporate/Capital AllocationQ4: net leverage target ~3.0x by YE25 Plan to reach ~3x ND/EBITDA by YE; consider tuck-ins and buyback reinstatement post deleveraging Strategic flexibility increasing

Management Commentary

  • Interim CEO Brent Shafer: “Our solid performance in the first quarter of 2025 reflects the ongoing impact of our transformation journey… well positioned to drive enhanced value… through execution, innovation and profitable growth” .
  • COO Heather Knight on MPT/HST: “First quarter sales… increased 6%… double-digit growth for our U.S. infusion systems… CCS… total U.S. capital orders rose 20%” .
  • CFO Joel Grade on tariffs: “We estimate the net impact… approximately $60 million to $70 million in 2025… majority in the second half… mitigation includes supplier optimization, alternative routes, targeted pricing, and exemptions” .
  • CFO on margins/stranded costs: “We now expect full year adjusted operating margin… between 16% to 16.5%. TSA income… $140M–$150M… aim to fully offset stranded costs and loss of TSA income by end of 2027” .

Q&A Highlights

  • Tariff mitigation and exposure: Management outlined actions and sized the 2025 net impact at ~$60–$70M, with a cautious stance on potential pharma tariffs; Claris finished-good exposure “very small” .
  • IV conservation and inventory: Hospitals conserving fluids; allocations largely removed by mid-May; distributor restocking shifted ~1.5 pts from Q2 to Q1, with usage expected to normalize over time .
  • Margins/TSA/MSA dynamics: Gross margin delta reflects reclassification to COGS and MSA dilution; TSA expected for 18–24 months with cost containment to offset stranded costs through 2027 .
  • Q2 deceleration logic: Guidance embeds IV conservation and conservatism in HST; FX dilutive to margins even as it helps revenue; operating margin range reflects tariffs and FX .
  • Capital allocation post deleveraging: Target ~3x net debt/EBITDA by YE; potential tuck-in M&A and buyback reinstatement thereafter .

Estimates Context

Consensus vs ActualQ3 2024Q4 2024Q1 2025
Revenue Estimate ($USD)3,846.8M*2,673.9M*2,587.3M*
Revenue Actual ($USD)2,699.0M 2,753.0M 2,625.0M
EPS Estimate ($)0.7765*0.5291*0.4832*
EPS Actual ($, Adjusted Cont. Ops)0.49 0.58 0.55
  • Q1 2025: revenue beat (+$37.7M vs consensus) and EPS beat (+$0.067); Q4 2024: revenue beat and EPS beat; Q3 2024: total EPS beat; note revenue estimate basis differences may include total Baxter vs continuing ops.
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Q1 quality beat with raised full-year guide: positive estimate revision risk near term; watch tariff mitigation cadence and FX drag on margins .
  • HST momentum and CCS backlog provide visibility; competitive wins and digital enhancements (Voalte Linq) underpin medium-term growth .
  • MPT inflection as Novum IQ adoption accelerates and IV supply normalizes post-Helene; near-term IV conservation tempers Q2 sequential growth .
  • Margin trajectory improving y/y on adjusted basis, aided by TSA income and opex discipline; GAAP margins remain pressured by special items and amortization .
  • FCF weak in Q1 due to inventory rebuild; expect improvement as allocations unwind and capital spending normalizes .
  • Capital allocation optionality increases as leverage approaches ~3x by YE; tuck-in M&A and potential buyback reinstatement could support EPS and multiple .
  • Trading setup: beat/raise quarter with tariff caution; focus on execution in HST, Novum IQ penetration, and anesthesia stabilization to sustain narrative and multiple .

Additional Q1 2025 Press Releases

  • Dividend: declared $0.17 per share, payable July 1, 2025; $0.68 annualized .
  • Product launches: Hemopatch with room-temperature storage in Europe; Voalte Linq voice-activated badge powered by Scotty presented at HIMSS25 .

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