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Investing.com -- Stifel downgraded Baxter International (NYSE:BAX) to Hold from Buy and slashed its price target to $25 from $36, citing a weaker-than-expected second quarter and a longer timeline for operational turnaround under incoming CEO Andrew Hider.
The firm said multiple issues weighed on Baxter’s Q2 results and full-year guidance, particularly soft U.S. Infusion Therapies & Technologies (ITT (NYSE:ITT)) revenue, which missed expectations due to lower hospital admissions and IV solution conservation.
Sales of $2.81 billion slightly missed consensus, while EPS of $0.59 fell short despite a lower tax rate. Margins also disappointed, with gross margin at 40.7% and operating margin at 15.1%, both below expectations.
Stifel expressed concern that many of Baxter’s challenges, including paused shipments of the NOVUM large volume pump are unlikely to be resolved quickly.
“We find ourselves believing that BAX is in an extended transition period,” the note said, adding that margin expansion and mid-single-digit sales growth targets may be harder to achieve near-term.
The downgrade comes ahead of Hider’s start as CEO in early September. While Stifel acknowledged his strong operational track record, it noted that real strategic change and execution improvement could take at least a year.
Baxter is still working through the impact of past missteps, including integration challenges from the Hill-Rom (NYSE:HRC) acquisition and recent business separations.
Looking ahead, pricing benefits that helped growth in 2023 and 2024 are expected to fade in 2026, adding another headwind. Stifel remains cautious until there is more clarity on Hider’s strategy and signs of sustained execution.