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On Tuesday, Goldman Sachs resumed coverage on Baxter International (NYSE:BAX) shares, assigning a Buy rating and establishing a price target of $42.00. The stock, currently trading at $35.94, has shown strong momentum with a 12.4% gain in the past week and a 20.3% rise year-to-date. According to InvestingPro analysis, Baxter appears slightly undervalued based on its proprietary Fair Value model. The firm’s analyst highlighted a positive skew in the risk/reward balance for the healthcare company, pointing to an anticipated 12.5% compound annual growth rate (CAGR) in earnings per share (EPS) over the next three years. InvestingPro data reveals that while the company wasn’t profitable in the last twelve months, analysts expect a return to profitability this year with an EPS forecast of $2.50 for FY2025.
Baxter International’s stock is currently trading at approximately 14 times the next twelve months’ (NTM) projected earnings, which is within its 10-year historical range of about 9 to 33 times. Goldman Sachs projects that the company will achieve significant improvements in margins and cash flow in the coming quarters, which supports their EPS estimates that are 2% to 13% higher than the consensus for the years 2025 to 2027.
The analyst’s outlook for Baxter is underpinned by several key factors. First, there is an expectation of revenue growth stabilization. Second, operating margins are anticipated to normalize. Third, the analyst foresees sustained double-digit growth in EPS. Lastly, there is a predicted inflection point in free cash flow in the second half of 2025 and beyond.
Goldman Sachs’ valuation does not rely on an expansion of the price-to-earnings (P/E) multiple based on the current consensus EPS. However, the analyst suggests that if Baxter can reduce debt faster, increase cash returns to shareholders, or find new ways to accelerate revenue growth, there could be potential for a re-evaluation of the company’s valuation, leading to further upside.
Baxter International, a global medical products company, is expected to focus on these strategic areas to drive growth and enhance shareholder value in the foreseeable future. The company has maintained dividend payments for 55 consecutive years, demonstrating long-term financial stability. For deeper insights into Baxter’s financials and growth prospects, InvestingPro subscribers can access 10+ additional expert tips and a comprehensive Pro Research Report, part of the platform’s coverage of 1,400+ US stocks.
In other recent news, Baxter International reported strong financial results for the fourth quarter of 2024, exceeding analyst expectations. The company achieved an adjusted earnings per share (EPS) of $0.58, surpassing the forecast of $0.52, and generated revenue of $2.75 billion, which outperformed the anticipated $2.67 billion. This positive performance was partly attributed to the successful launch of the Novum IQ infusion pump, which contributed to a 50% growth in the infusion business. Looking ahead, Baxter has provided optimistic guidance for 2025, projecting total sales growth of 5-6% and an adjusted EPS range of $2.45-$2.55. UBS analyst Danielle Antalffy raised Baxter’s stock price target to $35 from $32.50, maintaining a Neutral rating, while highlighting the company’s efforts to rejuvenate its product pipeline. However, the ongoing search for a new CEO introduces uncertainty regarding potential strategic shifts. Despite challenges, including the impact of Hurricane Helene, Baxter’s swift recovery efforts and strategic focus on innovation have positioned the company for continued growth.
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