• Total Company Sales Growth: 4% increase on both reported and constant currency basis.
• Adjusted Earnings Per Share (EPS): $0.80, ahead of guidance range of $0.77 to $0.79.
• Medical Products & Therapies Segment Growth: 7% increase at both reported and constant currency rates.
• Healthcare Systems & Technologies Segment Growth: 1% increase on both reported and constant currency rates.
• Pharmaceuticals Segment Growth: 1% increase on both reported and constant currency basis.
• Kidney Care Segment Growth: 4% increase on a reported basis and 5% at constant currency.
• Adjusted Operating Margin: 15.6%, inclusive of discontinued operations, an increase of 40 basis points versus the prior year.
• Adjusted Gross Margin: 42.5%, an increase of 80 basis points over the prior year.
• Net Interest Expense: $88 million, a decrease of $40 million versus the prior year period.
• Full Year Sales Growth Guidance: 1% to 2% as reported, approximately 2% on a constant currency basis.
• Full Year Adjusted EPS Guidance: $2.90 to $2.94 per diluted share, inclusive of discontinued operations.

• Warning! GuruFocus has detected 7 Warning Signs with BAX.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Baxter International Inc (NYSE:BAX) reported a 4% sales growth in the third quarter of 2024, in line with prior guidance.
• The Medical Products & Therapies segment led with a 7% growth, driven by strong demand for the Novum IQ platform and Advanced Surgery division.
• The company achieved an adjusted earnings per share of $0.80, surpassing the guidance range of $0.77 to $0.79.
• Baxter's North Cove facility recovery efforts were ahead of schedule, with key production lines restarting sooner than expected.
• The pending sale of the Kidney Care business is progressing well, expected to close by late 2024 or early 2025, which aligns with Baxter's strategic transformation goals.

Negative Points

• Hurricane Helene significantly impacted Baxter's North Cove operations, leading to an estimated $200 million sales loss in the fourth quarter.
• The Healthcare Systems & Technologies segment showed only 1% growth, with challenges in the US primary care market and international sales declines.
• Pharmaceuticals segment growth was limited to 1%, with supply constraints and sales phasing issues affecting performance.
• Stranded costs from the Kidney Care business divestiture negatively impacted operating margins by 240 basis points in the third quarter.
• The company anticipates a continued negative impact from Hurricane Helene into the first quarter of 2025, affecting sales and operations.

Q & A Highlights

Q: What are the expectations for the Healthcare Systems & Technologies (HST) segment, given its performance this quarter and the outlook for the primary care market? A: Jose Almeida, CEO, noted that the US Patient Support Systems (PSS) business is growing and gaining market share, with a healthy pipeline of orders. The Care Communications segment is also seeing growth, although installations have been delayed. The Front Line Care (FLC) segment is expected to stabilize in 2025, with new product launches and resolution of supply constraints.

Q: How will the hurricane impact Baxter's 2025 guidance, and what gives confidence in achieving the 4-5% growth and 16.5% margin target? A: Jose Almeida, CEO, explained that the hurricane's impact will mostly affect Q4 2024, with some carryover into Q1 2025. The company expects strong growth in pumps and sets, continued pricing benefits, and operational efficiencies to support the 2025 targets. Joel Grade, CFO, added that cost containment and TSA income will help offset stranded costs.

Q: What measures is Baxter taking to mitigate stranded costs and declining income from Vantive? A: Joel Grade, CFO, outlined plans to rationalize the distribution network, right-size the organization, and leverage TSA income in 2025. The company is also focused on cost containment to eliminate stranded costs by the end of 2027.

Q: How is Baxter addressing the risks associated with IV solutions manufacturing, and what are the implications for pricing and supply diversification? A: Jose Almeida, CEO, emphasized Baxter's global manufacturing network and rapid recovery capabilities, which differentiate it from competitors. The company has facilities worldwide to support supply continuity. While pricing wasn't specifically addressed, the focus is on maintaining robust operations and supply chain resilience.

Q: What is the outlook for Baxter's Novum IQ pump platform, and how is it performing in the market? A: Jose Almeida, CEO, reported significant market share growth for the Novum IQ platform, with strong acceptance and competitive conversions. The infusion hardware segment is up 50% this year, indicating robust demand and positioning for continued growth in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.