On the call this morning, we will be discussing Baxter's second quarter 2025 results along with our financial outlook for the third quarter and full year 2025. As you saw in this morning's release, our second quarter performance for continuing operations met our previously issued guidance on both top and bottom line. Specifically, second quarter sales from continuing operations grew 4% on a reported basis and 1% on an operational basis, with growth coming from all three segments. On the bottom line, adjusted earnings per share from continuing operations were $0.59, increasing 28% over the prior year.
These results did come in at the low end of our guidance ranges, reflecting softness in demand for certain products within the Medical Products & Therapies and Pharmaceuticals segments. We are confident in our strategy and our future opportunities to accelerate innovation, growth, and performance overall. Now I'd like to turn it over to Heather and Joel, who will share details on individual segment results, financial performance, and updated guidance. Sales in our Medical Products & Therapies, or MPT segment, were $1.3 billion and increased 1% in the quarter.
Performance in the quarter reflected strong demand for Advanced Surgery products, offset by softness in infusion therapies and technologies, or ITT. We continue to believe that hospitals will return to historic practices over time. The Baxter program provides participating healthcare organizations with dedicated on-demand inventory warehoused here in the U.S. Sales in Advanced Surgery products totaled $296 million and grew 5% globally.
| Metric | Period | Current guidance |
|---|---|---|
| Total reported sales growth | FY2025 | 6% to 7% (set) |
| Operational sales growth | FY2025 | 3% to 4% (lowered) |
| Net tariff impact | FY2025 | ~$40M (lowered ($25M net positive)) |
| Anticipated Vantiv MSA revenue | FY2025 | ~$320M (set) |
| FX contribution to top-line growth | FY2025 | ~50 bps (set) |
| IV fluid conservation assumption (low end) | 2H2025 | -20% (more conservative) |
| Metric | YoY | Note |
|---|---|---|
| Total continuing operations sales ($2.8B) | +4% reported / +1% operational | Growth across all three segments, with strength in drug compounding, Advanced Surgery, and CCS offsetting declines in injectables/anesthesia, ITT, and frontline care. |
| MPT segment sales ($1.3B) | +1% | Strong Advanced Surgery demand offset by softness in infusion therapies and technologies. |
| ITT division sales ($1B) | -1% | Hospital IV fluid conservation efforts and slightly lower U.S. patient admissions, partly offset by Novum IQ large-volume pump rollout. |
| Advanced Surgery sales ($296M) | +5% | Solid demand for hemostats and sealants, strong commercial execution, and steady procedure volumes. |
| HST segment sales ($767M) | +2% | Continued strong CCS sales, with international CCS up 7% and U.S. CCS up 3% on care communications and surgical solutions. |
| Pharmaceuticals segment sales ($612M) | +1% | Drug compounding growth of 7% offset by a 4% decline in injectables and anesthesia. |
| Adjusted gross margin (40.7%) | -170 bps | Vantiv MSA impact, lower IV solutions manufacturing volumes, and unfavorable product mix. |
| Adjusted operating margin (15.1%) | +180 bps | Operational execution and TSA income/reimbursements from Vantiv offset lower gross margin. |
| Adjusted EPS ($0.59) | +28% | Positive pricing, TSA income and other reimbursements, and lower interest and tax expense. |
| Adjusted tax rate (16.7%) | -400 bps | Benefits from strategic use of select tax attributes following the kidney care sale. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| IV fluid conservation | Low-end assumption of -10% | Low-end assumption of -20%; slight improvement seen but downside risk built in | More cautious |
| Novum IQ LVP infusion pump | Rollout helping offset fluid conservation impact | Voluntary, temporary ship/install pause; low end of guide assumes no further shipments in 2025 | Deteriorating near-term, confident long-term |
| Stranded cost mitigation | ~40 bps negative impact anticipated for 2025; removal by 2027 committed | On track with ~40 bps 2025 impact and 2027 removal target | On track |
| TSA/MSA from Vantiv | — | TSA income $52M and MSA revenue $98M in quarter; ~$320M MSA expected for FY2025; TSAs run ~24 months | Ongoing transition |
| Long-term 4-5% growth target | 4% to 5% growth model | Not achieved this year; viewed as still doable via Novum recovery, fluid volume normalization, and new product launches | Reaffirmed long-term |