Healthcare company Baxter International (NYSE: BAX) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 5% year on year to $2.84 billion. Next quarter’s revenue guidance of $2.81 billion underwhelmed, coming in 6.5% below analysts’ estimates. Its non-GAAP profit of $0.69 per share was 15.4% above analysts’ consensus estimates.

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StockStory’s Take

Baxter’s third quarter results were met with a negative market reaction, as the company delivered top-line growth but missed Wall Street’s revenue expectations. Management attributed performance shortfalls primarily to ongoing challenges in its Infusion Therapies & Technologies division, which faced a continued pause on Novum IQ Large Volume pump shipments, and to softness in U.S. demand for IV solutions. CEO Andrew Hider candidly stated, “We are not satisfied with our current performance,” emphasizing that operational and segment-specific headwinds required immediate attention. The Healthcare Systems & Technologies segment, however, demonstrated improved performance during the quarter.

Looking ahead, Baxter’s updated guidance reflects continued pressures in core business lines, especially as the Novum IQ pump shipment pause is expected to last beyond year-end and U.S. IV solution demand recovers more slowly than previously anticipated. Management lowered full-year profit expectations and outlined a cautious approach to capital allocation, including a significant dividend reduction to accelerate deleveraging. Hider highlighted the need for “significant focus, discipline and execution” in the coming quarters, while CFO Joel Grade noted that volume-related headwinds and product mix will continue to weigh on margins.

Key Insights from Management’s Remarks

Management cited operational challenges in infusion pumps and IV solutions, as well as improved advanced surgery and capital equipment demand, as key factors shaping the quarter’s financial results.

• Infusion pump shipment hold: The continued pause on Novum IQ Large Volume pump deliveries led to lost sales and customer transitions to alternative products, pressuring the Infusion Therapies & Technologies division.
• IV solutions recovery lags: U.S. demand for IV solutions remained below pre-Hurricane Helene levels, as hospitals maintained fluid conservation measures, and management expects only gradual improvement into next year.
• Advanced Surgery segment strength: The Advanced Surgery portfolio delivered double-digit growth, benefiting from increased procedure volumes and strong commercial execution across regions.
• Healthcare Systems & Technologies resilience: The Healthcare Systems & Technologies segment saw steady growth, particularly in Care and Connectivity Solutions, with U.S. capital orders up 30% year over year, indicating robust hospital investment in equipment.
• Product mix and cost pressures: Pharmaceutical segment growth was offset by an unfavorable product mix and elevated procurement costs, while overall company margins were impacted by volume softness and supply chain inefficiencies.

Drivers of Future Performance

Baxter’s outlook for the next quarter and full year is shaped by ongoing operational challenges, product launch delays, and continued margin pressures.

• Infusion pump uncertainties: The shipment hold on Novum IQ pumps is expected to persist beyond 2025, creating ongoing revenue risk as customers evaluate alternative solutions or return devices, while Spectrum IQ is positioned as an interim option.
• Margin headwinds and deleveraging: Management anticipates continued operating margin pressure due to lower volumes and higher supply chain costs, with a major focus on reducing leverage through cash flow improvements and a planned dividend cut to $0.01 per share.
• Slow recovery in IV solutions: The pace of IV solution demand normalization remains uncertain, as hospital purchasing patterns reflect a sustained focus on fluid conservation, and management forecasts only a gradual recovery extending into 2026.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch for (1) progress in resolving the Novum IQ pump shipment hold and customer retention within the infusion portfolio, (2) signs of demand normalization for U.S. IV solutions as hospitals adjust purchasing patterns, and (3) execution of cost reduction and deleveraging initiatives, including the impact of the reduced dividend on free cash flow. The pace of recovery in key business lines and updates on long-term strategy will also be important indicators.

Baxter currently trades at $18.87, down from $22.42 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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