BAX Stock Surges Following Q4 Earnings & Sales Beat, Margins Decline

Core Insights - Baxter International Inc. reported fourth-quarter 2024 adjusted earnings per share (EPS) of 58 cents, exceeding the Zacks Consensus Estimate of 52 cents by 11.5%, although this represents a 10.8% decline from the previous year due to increased costs and expenses [1][4][16] - On a GAAP basis, the company experienced a loss per share of 95 cents, compared to an EPS of 43 cents in the prior-year quarter, primarily due to special items including goodwill impairment and business optimization costs [2][16] - Revenue from continued operations reached $2.75 billion, reflecting a 0.9% increase on a reported basis and a 2% increase at constant currency, surpassing the Zacks Consensus Estimate by 3.4% [4][16] Revenue and Segment Performance - The Medical Products & Therapies segment reported total sales of $1.31 billion, nearly flat year over year but up 1% at constant currency, driven by strong sales of the Novum IQ infusion pump and Advanced Surgery products [8][9] - The Healthcare Systems and Technologies segment generated sales of $784 million, down 1% year over year, with the Front Line Care category sales totaling $280 million, down 8% [10][12] - The Pharmaceuticals segment saw total sales of $643 million, an 8% increase year over year, primarily due to strong demand for Drug Compounding services and specialty injectables [10][11] Margin and Expense Analysis - Adjusted gross profit was reported at $1.23 billion, a 0.7% increase year over year, but the adjusted gross margin contracted by 10 basis points to 44.5% [12][13] - Selling, general and administrative expenses rose by 11.4% to $761 million, while research and development expenses surged by 66.1% to $211 million [12][13] Future Guidance - For the first quarter of 2025, Baxter anticipates sales growth from continuing operations of 3-4% and adjusted EPS in the range of 47-50 cents, with the Zacks Consensus Estimate for sales at $2.62 billion [14][15] - For the full year 2025, continuing operational sales growth is expected to be 5-6%, with adjusted EPS projected between $2.45 and $2.55 [15][16] Strategic Transformation - Baxter completed its transformation plan, including the divestiture of its Kidney Care business for $3.4 billion, which is expected to enhance operational efficiency and financial flexibility [5][17] - The company has shifted to a vertical operating model, which is anticipated to improve response times to market changes and foster innovation [6][17] - Recent product launches and FDA approvals are expected to position Baxter for strong growth in 2025 and beyond, with a focus on high-value, patient-centric solutions [19]