Can Baxter Recover as Demand Dips Production Improvements?

Baxter International has significantly reduced its 2025 profit forecast after facing disappointing quarterly earnings.

The healthcare company struggles to return to pre-Hurricane Helene production levels, having fully recovered production-wise, yet grappling with historically low demand.

Indeed, shares for the company plummeted significantly to levels not seen in 19 years.

An expansive company

Baxter International is an American multinational healthcare corporation, operating primarily to address chronic and acute health conditions.

Having been a reliable partner to hospitals, doctors and other caregiving professionals for nearly a century, Baxter remains central to millions of patients and health industry participants globally.

However, the aftermath of Hurricane Helene in 2024 coupled with changes in its leadership and production restructuring present instability.

Despite efforts, Baxter's latest quarterly performance disappoints, painting a challenging picture for the organisation's financial health.

Supply and demand issues

In light of its quarterly earnings release, Baxter significantly reduced its predicted 2025 profit.

Shares plummet around 23%, sinking to their lowest ebb since 2006.

Over the past year, the organisation endeavoured to reconstruct its supply chain and ramp up production, particularly after Hurricane Helene wreaked havoc in September 2024.

This storm inundated Baxter’s North Cove production facility, thereby impeding the manufacturing of its Intravenous (IV) solutions.

Almost five months later, Baxter announced a restoration to pre-hurricane production levels at North Cove.

In May, the company posted: "Today, we are proud to announce that our inventory levels are restored and therefore allocations have been removed for virtually all IV Solutions product codes manufactured at North Cove."

Although production levels have normalised, the transient production halt leads to long-term ripples affecting supply and demand dynamics.

Due to the abrupt cessation of IV solution production, hospitals were advised to monitor fluid usage strictly.

While the supply is currently stabilised, the enthusiasm from hospitals to requisition these solutions is yet to rebound.

Revenue failings

Originally, Baxter anticipates second-quarter revenue at US$2.82bn, yet reports a figure of US$2.81bn.

Adjusted earnings reach US$0.59 per share, contrasting against forecasts of US$0.61.

JPMorgan analyst Robbie Marcus comments: "Many investors had feared this scenario given the lack of a pre-announcement following a new CEO in early July."

This observation reflects on the prevalent instability within Baxter International, potentially eroding investor confidence.

Regarding anticipated tariffs, Baxter initially estimates an impact between US$60m and US$70m; however, it revises its 2025 estimation downward to US$40m.

Within its second-quarter findings, Baxter elaborates on the performance across various segments:

• Medical Products & Therapies: Sales remain steady on a reported basis, marking a 1% increase operationally, culminating in around US$1.32bn.
• Healthcare Systems & Technologies: Sales report a rise of 3% and 2% on reported and operational bases, respectively, totalling US$767m. While Front Line Care sales progress sequentially, a year-on-year decline manifests.
• Pharmaceuticals: Totalling US$612m, sales increased by 2% reported and 1% operationally. Yet, declines appear in injectable products by 1% and anaesthetics show a low double-digit decrease globally this quarter.

Broadly, Baxter maintains an outlook for a 6% to 7% sales uplift reported and expects an operational growth between 3% to 4% throughout 2025.