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Investing.com -- S&P Global Ratings has downgraded Baxter International Inc. to ’BBB-’ from ’BBB’ due to continued underperformance, with a stable outlook.
The rating agency cited multiple headwinds pressuring Baxter’s revenue growth and profitability, with third-quarter 2025 results coming in weaker than expected. This follows disappointing second-quarter performance, prompting the company to reduce its 2025 operational growth estimate to 1%-2%, down from earlier projections of 3%-4% in August and 4%-5% before that.
The downgrade reflects ongoing challenges in Baxter’s core business segments. Hospital conservation efforts have reduced demand for IV solutions and certain pre-mixed pharmaceutical products, contributing to a 4% operational sales decline in the company’s Infusion Therapies & Technologies division during the third quarter.
Further complicating matters is Baxter’s voluntary pause in shipments and installations of its Novum IQ large volume pump in the U.S. and Canada implemented earlier in 2025. Some customers have returned the product, resulting in negative revenue adjustments. The company now expects this product hold to extend into 2026, longer than previously anticipated.
S&P has revised Baxter’s revenue growth forecast downward for 2026, incorporating the extended timeframe for the Novum pump’s return to market and potential additional product returns. The rating agency noted concerns that more customers might switch to competing products, posing risks to 2026 revenue growth and Baxter’s market position in the competitive IV infusion devices sector.
Baxter also reduced its 2025 operational growth guidance for its Pharmaceutical segment to approximately 2% from 4%-5%, reflecting softer demand for pre-mixed solutions in its Injectables & Anesthesia division. While the drug compounding division grew 11% in the third quarter, S&P expects this will not offset headwinds in other areas.
The rating agency now forecasts operational revenue growth of 1% in 2025 and 2.6% in 2026, down from previous estimates of 3.2% and 3.5%, respectively. S&P also lowered its adjusted EBITDA margin expectations to 18.5%-19.0% for both years, reflecting lower sales volumes and a less profitable product mix.
S&P expressed a less favorable view of Baxter’s business, noting that while the company provides essential medical products with significant market share, it operates in mature markets with relatively low growth. The company’s research and development spending lags behind peers at about 4.5% of sales versus the peer average of 6.5%.
Baxter’s profitability has weakened compared to its peer group, with an adjusted EBITDA margin of about 19% in the first nine months of 2025, compared to the 27% average among large diversified medical device manufacturers.
Despite Baxter’s commitment to reduce leverage, including through a planned dividend reduction, S&P forecasts adjusted leverage of about 4.2x in 2025 and 3.7x in 2026, higher than previous projections of 3.8x and 3.4x.
The stable outlook reflects S&P’s expectation that leverage will decline to under 3.75x by the end of 2026 and remain below this threshold in coming years.
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