Baxter International NYSE: BAX raised its full-year 2026 outlook after reporting third-quarter sales and adjusted earnings that exceeded its expectations, citing broad-based growth across its portfolio, improving execution and strong free cash flow generation.
Third-quarter global sales totaled about $3 billion, up 5% on both a reported and organic basis. Adjusted earnings were $0.58 per diluted share, down 16% from the prior-year period because the prior year included discrete tax benefits. President and Chief Executive Officer Andrew Hider said every division contributed to growth, with Advanced Surgery, drug compounding and infusion systems serving as the largest contributors.
“Our third quarter performance provides further evidence that our turnaround is gaining traction,” Hider said. “We continue to advance our strategic priorities and delivered results ahead of our expectations.”
Updated 2026 Outlook
Baxter increased its forecast for full-year organic sales growth to 3% to 4%, from a previous range of 2% to 3%. The company also raised the low end of its adjusted earnings outlook, now expecting $2.05 to $2.15 per diluted share, compared with prior guidance of $1.95 to $2.15.
Chief Financial Officer John Rogers, who joined Baxter on Oct. 1, said the company now expects reported sales growth of 4% to 5% in 2026. Foreign exchange is expected to add roughly 100 basis points to reported growth, while master services agreement revenue from Vantive is expected to create a roughly $25 million, or 30-basis-point, headwind to reported growth.
Baxter maintained its forecast for full-year adjusted operating margin of 13% to 14% and expects its tax rate to be between 18.5% and 19.5%. The company reduced its projected range for non-operating expenses to $245 million to $255 million, reflecting lower interest expense after debt reduction.
Management said its updated outlook implies fourth-quarter organic growth at a level similar to the approximately 5% growth delivered in the third quarter. Kevin Moran, Baxter’s vice president of investor relations, said the fourth quarter is expected to benefit from continued growth in infusion therapies and platforms, Advanced Surgery, drug compounding and Healthcare Systems & Technologies.
Segment Performance
Medical Products & Therapies sales rose 6% organically to $2.1 billion. Infusion Therapies & Platforms sales increased 4% to $1.8 billion, supported by infusion systems, drug compounding and IV solutions. Drug compounding grew 9%, while injectables sales declined 3%, primarily because of price deflation and manufacturing challenges at Baxter’s Round Lake, Illinois, facility.
Advanced Surgery sales grew 12% to $342 million, reflecting demand and higher volumes for hemostats and sealants, commercial execution across regions and steady procedure volumes. During the question-and-answer session, Hider said the business also benefited from a competitor’s supply challenge, which could make future comparisons more difficult.
Healthcare Systems & Technologies sales increased 4% to $806 million. Care & Connectivity Solutions grew 5% to $498 million, led by Global Surgical Solutions, Patient Support Systems, execution against the U.S. backlog and international demand. Front Line Care sales rose 3% to $308 million, supported by connected monitoring demand, including for Connex 360, partly offset by planned product exits.
The Medical Products & Therapies adjusted operating margin rose 10 basis points to 20.9%, while Healthcare Systems & Technologies margin increased 140 basis points to 17.2%. At the company level, adjusted operating margin declined 40 basis points to 14.5%, reflecting sales mix, lower pricing contribution and lower injectables sales, partly offset by higher volumes.
Round Lake Actions and Supply Reliability
Baxter said it will discontinue production of cephalosporin products at its Round Lake specialty injectable facility at the end of October. The company will continue supporting contracted customers into 2027. The products are expected to contribute approximately $50 million in sales and $30 million in operating income in 2026.
Management said the move will reposition the plant for non-cephalosporin production, reduce complexity and support supply resilience. Hider said the decision also helps address complexities cited in an FDA warning letter related to an earlier inspection of the facility. Baxter recorded $39 million in restructuring costs tied to the action during the third quarter, which were excluded from non-GAAP earnings.
The company said it has implemented corrective and preventive actions, as well as broader quality and operational enhancements at Round Lake and across its manufacturing network. It also reported improvement in supply challenges involving a contract manufacturer in the injectables business and expects the impact to be more limited going forward.
Cash Flow, Deleveraging and Capital Allocation
Third-quarter free cash flow was $448 million, bringing year-to-date free cash flow to $705 million. The quarterly result benefited from improved operations, working-capital discipline, timing of certain cash receipts, an IEEPA tariff refund recognized in the prior quarter and legal settlement proceeds.
During the quarter, Baxter completed a $600 million cash tender offer and retired $854 million of debt. The company recognized a pretax gain of approximately $253 million from the early extinguishment of debt, which was excluded from non-GAAP earnings. Management reiterated its goal of reaching net leverage of about three times by year-end.
Hider said reducing leverage remains the company’s near-term capital-allocation priority, though a stronger balance sheet could eventually provide greater flexibility for internal investment, tuck-in acquisitions and share repurchases. He said potential acquisitions would be evaluated based on strategic fit, market opportunity, Baxter’s ability to integrate and operate an asset, and expected financial returns.
Looking toward 2027, Rogers said Baxter faces several moving parts, including inflation, tariffs, the end of Vantive transition services by January 2027, planned product exits and the cephalosporin discontinuation. He said the company also sees opportunities to offset pressures through operational efficiencies and cost savings, but said detailed 2027 guidance will be provided with fourth-quarter results in February.
About Baxter International (NYSE:BAX)
Baxter International Inc is a global medical products and healthcare technology company headquartered in Deerfield, Illinois. The company develops, manufactures and distributes products used in hospitals, clinics, ambulatory care centers and other healthcare settings.
Baxter's portfolio has included intravenous therapies and administration systems, infusion pumps, connected-care technologies, surgical products, patient monitoring equipment and products used in medication preparation and delivery.
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