Last Update 15 Dec 25

Fair value Decreased 1.11%

BAX: Margin Recovery Will Follow New Leadership And Cost Discipline Over Time

Analysts have trimmed their fair value estimate for Baxter International slightly, from approximately $24.07 to $23.80 per share, reflecting reduced price targets to around $22 in light of softer sales, margin pressure, and lowered guidance that signal ongoing near term earnings headwinds.

Analyst Commentary

Analyst sentiment around Baxter International remains mixed, with recent earnings results and guidance prompting a more cautious stance on the stock despite its reduced valuation. The latest price target revisions to $22 highlight persistent uncertainty around the company’s ability to re accelerate growth and restore profitability over the medium term.

Bullish Takeaways

Bullish analysts note that lower R&D and SG&A spending is helping to cushion the impact of weaker gross margins, supporting earnings resilience even as operational pressures build.
The modest reduction in fair value and price targets suggests that much of the near term headwind narrative may already be reflected in the share price, which may limit further downside from current levels.
Management’s decision to recalibrate FY25 organic growth and EPS guidance is viewed by some as clearing the bar for future execution. This may set the stage for upside if operational improvements gain traction.
With a new CEO in place, bullish analysts see an opportunity for portfolio and cost structure optimization that could unlock longer term value beyond the current guidance window.

Bearish Takeaways

Bearish analysts emphasize that total sales modestly missing guidance across all segments, particularly in MPT and Pharma, raises concerns about Baxter’s ability to re establish dependable top line growth.
The sharp decline in gross margin to 39.4%, driven by manufacturing variances expected to persist into late 2025 and early 2026, is seen as a structural profitability risk rather than a short term fluctuation.
Reduced FY25 organic growth and EPS guidance to 1%–2% and $2.35–$2.40, respectively, reinforces the view that earnings headwinds will likely outweigh tailwinds through at least 2026, constraining multiple expansion.
Ongoing business pressures and the transition under new leadership increase execution risk. Bearish analysts therefore question whether Baxter can deliver the operational turnaround needed to justify even the lowered price targets.

What's in the News

Multiple securities class action lawsuits have been filed alleging Baxter concealed systemic safety defects in its Novum LVP infusion pumps, including reports of serious injuries and patient deaths linked to underinfusion and overinfusion, and misled investors about the product's safety and commercial prospects (Key Developments).
Baxter voluntarily and temporarily paused shipments and planned installations of the Novum LVP after escalating safety concerns and disclosure of dozens of serious injury reports and multiple deaths, which triggered a sharp decline in the company's share price (Key Developments).
The Board of Directors cut the quarterly dividend to USD 0.01 per share, which implies a substantially reduced annual payout of USD 0.04 and signals a more conservative capital return posture (Key Developments).
Baxter updated its 2025 guidance and now expects 4% to 5% reported sales growth from continuing operations, but only 1% to 2% growth on an operational basis, which underscores muted underlying momentum (Key Developments).
The company launched the Welch Allyn Connex 360 Vital Signs Monitor, an FDA cleared, next generation connected monitoring device featuring enhanced security, automation, and upgradeability, which expands Baxter's presence in the patient monitoring market (Key Developments).

Valuation Changes

The fair value estimate has fallen slightly from approximately $24.07 to $23.80 per share, reflecting a modest downward adjustment in intrinsic value expectations.
The discount rate has edged down from about 10.02% to 9.90%, indicating a marginally lower required return embedded in the valuation model.
The revenue growth assumption is essentially unchanged at around 1.75%, signaling a stable outlook for top line expansion.
The net profit margin assumption remains effectively flat at roughly 6.25%, suggesting no material shift in long term profitability expectations.
The future P/E multiple has declined slightly from about 23.0x to 22.7x, implying a modestly lower valuation multiple applied to forward earnings.

Recovery in hospital activity and patient admissions is driving higher demand for Baxter's core products, supporting potential revenue and margin growth.
Innovation and portfolio optimization, combined with new leadership, position Baxter for efficiency gains, higher-margin offerings, and long-term market share expansion.
Volume recovery and profitability are at risk due to sustained demand weakness, supply chain issues, quality concerns, and margin pressures amid ongoing operational transitions.

Catalysts

About Baxter International

Through its subsidiaries, provides a portfolio of healthcare products in the United States.What are the underlying business or industry changes driving this perspective?

Normalization of hospital purchasing patterns and patient admissions is expected to drive increased utilization of Baxter's core IV solutions and infusion systems as fluid conservation efforts abate, providing upside to revenue growth and margin expansion as volumes recover.
Baxter's strengthened focus on innovation-including new product launches in advanced infusion systems, AI-enabled devices, and compounding-aligns with growing demand for efficient, digitalized, and connected healthcare equipment, positioning the company to capture higher-margin revenue streams and gain market share.
An aging population and the rising prevalence of chronic diseases are long-term drivers of increased demand for Baxter's critical care, compounding, and advanced surgery products, supporting sustained top-line growth as these demographic shifts accelerate healthcare utilization.
Ongoing portfolio optimization efforts, including divestitures, cost reductions, and a commitment to eliminate stranded costs by 2027, aim to streamline operations, improve efficiency, and drive net margin improvement, which should be reflected in future earnings growth.
The appointment of a new CEO with a track record in operational excellence is expected to accelerate transformation initiatives, refocus the organization on innovation and commercial execution, and support long-term expansion in operating margins and EPS.

Baxter International Earnings and Revenue Growth

Baxter International Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Baxter International's revenue will grow by 3.7% annually over the next 3 years.
Analysts assume that profit margins will increase from -2.3% today to 7.5% in 3 years time.
Analysts expect earnings to reach $913.6 million (and earnings per share of $1.81) by about September 2028, up from $-247.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.0 billion in earnings, and the most bearish expecting $752 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.5x on those 2028 earnings, up from -50.8x today. This future PE is lower than the current PE for the US Medical Equipment industry at 29.7x.
Analysts expect the number of shares outstanding to grow by 0.59% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.1%, as per the Simply Wall St company report.

Baxter International Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing hospital IV fluid conservation and a slower-than-anticipated return to historical usage patterns, with management now assuming 20% below-normal levels for the foreseeable future, pose a risk to volume recovery and may limit revenue growth if hospitals do not resume prior practices.
Temporary suspension and quality-related field actions for Novum IQ infusion pumps-amid customer and regulatory scrutiny-raise the risk that the pause could extend or repeat, leading to lost momentum, delayed product launches, and potential market share loss, negatively impacting both revenue and operating margins.
Sustained softness in U.S. injectables and inhaled anesthesia, compounded by unexpected shifts toward alternative administration routes (such as IV push), point to persistent demand weakness and potential product substitution or competitive threats, which could depress pharmaceutical segment sales and overall company revenues.
Margin compression from unfavorable product mix, reduced manufacturing volumes, and ongoing absorption issues in the integrated supply chain have already resulted in lower-than-expected gross and operating margins, which could persist if volume/mix headwinds are not resolved promptly, thus impacting net margin and earnings growth.
The ongoing need to manage and reduce stranded costs post-divestiture (such as the Kidney Care business) synchronized with the phase-out of lucrative TSA income introduces execution risk-if costs are not removed at the same pace as TSA roll-off, there could be a margin gap, further stressing net margins and overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $29.0 for Baxter International based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $47.0, and the most bearish reporting a price target of just $19.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $12.1 billion, earnings will come to $913.6 million, and it would be trading on a PE ratio of 21.5x, assuming you use a discount rate of 9.1%.
Given the current share price of $24.45, the analyst price target of $29.0 is 15.7% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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