Baxter’s fourth quarter results were met with a significant negative market reaction, as the company’s top-line growth did not translate into improved profitability. Management attributed the quarter’s underperformance to a mix of unfavorable product and geographic sales, nonrecurring inventory adjustments, and higher-than-expected costs, particularly in manufacturing and tariffs. CEO Andrew Hider acknowledged, “The results in the quarter are disappointing and underscore the work ahead to improve performance and execute more consistently.” The Advanced Surgery business was a bright spot, but continued operational challenges and a new baseline for IV Solutions volumes weighed on overall results.
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Baxter (BAX) Q4 CY2025 Highlights:
- Revenue: $2.97 billion vs analyst estimates of $2.81 billion (8% year-on-year growth, 5.7% beat)
- Adjusted EPS: $0.44 vs analyst expectations of $0.54 (17.8% miss)
- Adjusted EBITDA: $592 million vs analyst estimates of $508.8 million (19.9% margin, 16.4% beat)
- Adjusted EPS guidance for the upcoming financial year 2026 is $1.95 at the midpoint, missing analyst estimates by 12.8%
- Operating Margin: -24.5%, down from -15.8% in the same quarter last year
- Constant Currency Revenue rose 3% year on year (2% in the same quarter last year)
- Market Capitalization: $11.25 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 From Baxter’s Q4 Earnings Call
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David Harrison Roman (Goldman Sachs) asked about how Baxter is ensuring business sustainability amid strategic and operational challenges. CEO Andrew Hider emphasized new accountability structures and ongoing customer engagement, while CFO Joel Grade highlighted improved forecasting discipline through the Baxter GPS system.
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Robbie Marcus (JPMorgan) questioned the company’s ability to grow earnings as Transitional Services Agreements (TSAs) roll off in 2027. CFO Robert Justin Marcus said Baxter aims to eliminate stranded costs by 2027 but would not provide specific earnings guidance for that year.
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Vijay Muniyappa Kumar (Evercore ISI) pressed for clarity on customer willingness to wait for Novum pump resolutions. Management said customers are “in a bit of a wait-and-see mode,” but emphasized continued support from the Spectrum platform and upcoming PureVu launch.
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Lawrence H. Biegelsen (Wells Fargo) sought details on the drivers of gross margin decline and outlook for improvement. CFO Robert Justin Marcus cited unfavorable mix, elevated manufacturing costs, and nonrecurring items, expecting gradual recovery in the second half of 2026.
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Danielle Antalffy (UBS) inquired about the most promising opportunities within Baxter’s portfolio. CEO Andrew Hider pointed to innovation in Advanced Surgery and the potential for incremental gains through continuous product launches, while noting smaller market exits under review.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will closely track (1) the pace and impact of new product launches such as the Connect 360 Monitor and Dynamo stretcher, (2) signs of margin stabilization as cost containment and operational efficiency initiatives take hold, and (3) updates on customer adoption and resolution timelines for the Novum pump platform. We will also monitor external cost pressures, including tariffs and evolving hospital purchasing trends, for their influence on Baxter’s execution.
Baxter currently trades at $21.80, down from $22.27 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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