Today, we will discuss Baxter's fourth quarter results, along with our financial outlook for the full year 2026. This morning, a press release was issued with our preliminary earnings results and updated outlook. On the call, we will reference operational growth, which excludes the impact of foreign exchange, MSA revenues from Vantive, and the previously announced exit of IV Solutions from China. We will also reference organic growth, which excludes the impact of foreign exchange, MSA revenues from Vantive, and any impact from future business acquisitions or divestitures.
Total company adjusted earnings from continuing operations were $0.44 per diluted share. While responses have varied, in general, customers are waiting for additional clarity on the nature and timing of the additional corrections that we will look to deploy. Margins were pressured by both an unfavorable mix of sales as well as some non-recurring items, including inventory adjustments. The Healthcare Systems and Technologies segment had another quarter of consistent performance, including a contribution from the recently launched Connex 360 monitor in the Front Line Care division.
As I said during our last earnings call and reiterated last month, I am focused on three main priorities. Most significantly, we are delayering levels of leadership, including removing the segment management layer and embedding critical functional roles directly in each of our businesses. We've also taken actions within our IV Solutions business to rightsize a support footprint to align to the lower demand environment, which we believe is a new baseline in the market. In Pharma, in addition to market demand softness, supply and backorder challenges have impacted revenue and driven unfavorable product mix.
| Metric | Period | Current guidance |
|---|---|---|
| Outlook basis | FY2026 | shifting to organic growth measure going forward (Methodology change) |
| Free cash flow | FY2026 | expected to improve vs. 2025, back-half weighted (Improvement) |
| Stranded cost elimination | by end of 2027 | on track to eliminate stranded costs by end of 2027 (Reaffirmed) |
| Q1 2026 profile | Q1 2026 | most challenging quarter; earnings skewed to H2 (New) |
| R&D investment | FY2026 | at or above historical levels (Sustained/up) |
| Pricing contribution | FY2026 | reduced contribution from pricing (Lower) |
| Investor Day | FY2026 | held off / postponed (Withdrawn) |
| Metric | YoY | Note |
|---|---|---|
| Total sales (continuing ops) | +8% reported, +3% operational | Growth across all segments; reported includes $84M Vantive MSA revenue and FX |
| Adjusted EPS (continuing ops) | $0.44, below expectations | Unfavorable mix, non-recurring/inventory adjustments, higher tax rate, partly offset by pricing |
| MPT sales | +4% | Growth in Infusion Therapies and Technologies plus continued Advanced Surgery strength |
| ITT sales | +1% | IV solutions benefited from favorable prior-year comparison, partly offset by lower Novum IQ LVP pump sales |
| Advanced Surgery sales | +11% | Solid hemostats/sealants demand, strong commercial execution, steady procedure volumes |
| HST sales | +4% | Double-digit Surgical Solutions growth and Patient Support Systems momentum; CCS +4%, Front Line Care +3% |
| Pharmaceuticals sales | +2% | Drug Compounding +18% offset by Injectables and Anesthesia -9% on tough comps, soft pre-mix, IV-push substitution, soft anesthesia |
| MPT operating margin | 15.4%, -110 bps | Higher manufacturing/supply costs, unfavorable mix, inventory adjustments, tariffs; partly offset by pricing and Kidney Care TSA income |
| HST operating margin | 15.2%, -330 bps | Unfavorable product and geographic mix, increased corporate allocation, tariffs; partly offset by TSA income |
| Pharmaceuticals operating margin | 5.8% | Higher manufacturing/supply costs, unfavorable mix, price erosion, inventory adjustments, increased corporate allocation post Kidney Care sale |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Turnaround / stabilize-strengthen-improve priorities | introduced on prior call | actions in flight; new operating model, GPS rollout, early in journey | Advancing |
| Baxter GPS (Growth and Performance System) | rolled out in October | first President's Kaizen held; driving forecasting accuracy and accountability | Expanding |
| Operating model redesign | — | delayering, removing segment management, full P&L accountability per business; Pharma combined with ITT | New |
| Novum IQ LVP ship/installation hold | previously discussed; uncertain customer behavior | net impact more modest than guided; hold assumed in place for full year; corrections progressing | Ongoing/uncertain |
| Deleveraging / balance sheet | ongoing priority | FCF >$450M in Q4; deleveraging precedes M&A | Progressing |
| Vantive TSA / stranded costs | deal closed Jan 31, 2025 | TSAs tail off in 2026, mostly fall in early 2027; stranded costs to be eliminated by end 2027 | On track |
| Hurricane Helene fluid-conservation impact | discussed previously | clinical practice changes persist, treated as new baseline weighing on IV solutions volumes | Persisting |
| Tariffs | not present in H1 2025 | a margin headwind, expected to continue into 2026 | Worsening |