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Introduction & Market Context
Baxter International Inc. (NYSE:BAX) reported strong first-quarter 2025 results on May 1, with sales and earnings exceeding guidance, prompting the company to raise its full-year outlook. The healthcare equipment and supplies company saw its stock rise 4.3% in premarket trading following the announcement, building on momentum from its previous quarter’s performance.
The company’s shares, which closed at $31.17 on April 30, have been trading between $26.25 and $40.49 over the past 52 weeks. Baxter’s positive Q1 results continue the trend seen in Q4 2024, when the company’s earnings beat sent the stock up 7%.
Quarterly Performance Highlights
Baxter reported worldwide sales of $2.6 billion for the first quarter, representing 5% growth on both a reported and operational basis, exceeding the company’s original guidance of 3-4%.
As shown in the following performance highlights chart:
Adjusted earnings per share from continuing operations reached $0.55, a significant 53% increase compared to the same period last year and above the company’s guidance range of $0.47-$0.50. While GAAP gross margin declined 580 basis points year-over-year to 32.8%, adjusted gross margin showed a more modest decline of 160 basis points to 41.8%.
A key driver of profitability was the substantial improvement in adjusted operating margin, which increased 260 basis points to 14.9%. This improvement was primarily achieved through reduced SG&A expenses, which decreased from 26.3% to 23.2% of sales, while R&D investment increased from 4.8% to 5.3% of sales.
The company’s performance compared to its original guidance demonstrates strong execution across key metrics:
Segment Analysis
Baxter’s performance varied across its three operating segments, with Healthcare Systems & Technologies showing the strongest results.
The Medical (TASE:BLWV) Products & Therapies segment, which represents the largest portion of Baxter’s business, generated sales of $1.26 billion, up 3% on a reported basis and 6% operationally. Operating income for this segment increased 7% to $244 million compared to Q1 2024.
The Healthcare Systems & Technologies segment delivered the strongest performance with sales of $704 million, up 6% on both a reported and operational basis. More impressively, operating income surged 39% to $93 million, reflecting significant margin expansion.
The Pharmaceuticals segment showed mixed results with sales of $581 million, up just 1% on a reported basis and 3% operationally. However, operating income declined 19% to $63 million, indicating margin pressure in this business unit.
Strategic Initiatives
Baxter highlighted several strategic initiatives during its presentation, including portfolio management actions to support accelerated growth and improved profitability. The company is focusing on disciplined capital allocation with priorities including debt repayment, dividends, and share repurchases to offset annual dilution.
Following the sale of its Kidney Care business, Baxter utilized approximately $3 billion of proceeds for debt repayment, working toward a net leverage target of approximately 3.0x by the end of 2025. The company maintained its quarterly dividend of $0.17 per share and reported a strong cash position with approximately $2.3 billion in cash and cash equivalents as of March 31, 2025.
On the innovation front, Baxter launched the Voalte Linq device powered by Scotty assistant and introduced Hemopatch Sealing Hemostat with room temperature storage in Europe, demonstrating its continued investment in new products to drive future growth.
Forward-Looking Statements
Based on its strong Q1 performance, Baxter raised its full-year 2025 guidance. The company now expects:
For the second quarter of 2025, Baxter projects:
The company also provided operational sales growth guidance by segment for the full year 2025:
The Medical Products & Therapies segment is expected to grow approximately 5% operationally, while Healthcare Systems & Technologies is projected to grow around 3%. The Pharmaceuticals segment, despite its Q1 margin challenges, is forecast to deliver the strongest growth at 5-6% operationally.
These projections suggest Baxter is confident in its ability to maintain momentum throughout 2025, with particular emphasis on improving performance in its Pharmaceuticals segment while continuing to leverage strengths in its other business units.
Full presentation:
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