Baxter’s first quarter saw revenue and adjusted profit both exceed Wall Street expectations, but the market responded cautiously to the results. Management attributed the quarter’s performance to strong execution in Medical Products & Therapies as well as Healthcare Systems & Technologies, highlighting robust demand for infusion systems and progress in stabilizing IV solutions supply after earlier disruptions. Interim CEO Brent Shafer noted, “Our results reflect the building momentum of our strategic transformation journey,” while COO Heather Knight emphasized that distributor inventory rebuilds and targeted product launches, particularly in U.S. infusion systems, played central roles in the quarter’s outcome.
Is now the time to buy BAX? Find out in our full research report (it’s free).
Baxter (BAX) Q1 CY2025 Highlights:
- Revenue: $2.63 billion vs analyst estimates of $2.58 billion (5.4% year-on-year growth, 1.9% beat)
- Adjusted EPS: $0.62 vs analyst estimates of $0.48 (28.3% beat)
- Adjusted EBITDA: $639 million vs analyst estimates of $484.8 million (24.3% margin, 31.8% beat)
- Revenue Guidance for Q2 CY2025 is $2.82 billion at the midpoint, below analyst estimates of $2.83 billion
- Management slightly raised its full-year Adjusted EPS guidance to $2.51 at the midpoint
- Operating Margin: 2.2%, down from 4.6% in the same quarter last year
- Constant Currency Revenue rose 7% year on year (2% in the same quarter last year)
- Market Capitalization: $15.7 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Baxter’s Q1 Earnings Call
- Joanne Wuensch (Citi) pressed for detail on tariff mitigation and the sustainability of HST growth. CFO Joel Grade described ongoing supply chain optimization and phased mitigation, while COO Heather Knight emphasized strong HST backlog and competitive wins, but maintained a cautious outlook.
- David Roman (Goldman Sachs) asked about the effects of IV fluid conservation and possible shifts in hospital inventory behavior. Knight explained that while some conservation persists, inventory rebuilding is underway and baked into forecasts.
- Travis Steed (BofA Securities) inquired about margin pressures and the path to pre-pandemic levels. Grade cited functional cost reclassifications, MSA dilution, and higher planning costs as current headwinds, with margin improvement tied to product mix and innovation.
- Vijay Kumar (Evercore ISI) sought clarification on the deceleration in Q2 growth and operating margin impact from tariffs. Grade attributed lower Q2 growth to continued IV fluid conservation and cautious HST assumptions, with margin changes linked to tariffs and foreign exchange.
- Robbie Marcus (JPMorgan) explored distributor fluid stocking and HST sustainability. Knight quantified distributor stocking’s Q1 effect and highlighted robust HST order books and new product adoption, while acknowledging external uncertainties.
Catalysts in Upcoming Quarters
In upcoming quarters, our analysts will focus on (1) the pace of IV solutions inventory normalization and whether hospital conservation persists, (2) the effectiveness of Baxter’s tariff mitigation strategies as tariffs phase in, and (3) sustained order growth and competitive wins in the HST segment. Successful execution on margin improvement programs and the timing of a permanent CEO appointment will also be important indicators.
Baxter currently trades at $30.61, down from $31.16 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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