Insights

Why Baxter International Stock Is Tumbling Today

What happened

Shares of Baxter International (NYSE: BAX) were tumbling 8.8% lower as of 11:24 a.m. ET on Thursday after falling as much as 11.8% earlier in the day. The decline came after the healthcare company announced its second-quarter financial results.

Baxter reported Q2 revenue of $3.75 billion, up 21% year over year. However, this missed the consensus Wall Street revenue estimate of $3.88 billion. The company posted Q2 adjusted earnings per share of $0.87, in line with the average estimate of analysts surveyed by Refinitiv.  

So what

At first glance, Baxter’s Q2 results look solid. So why did the healthcare stock sink so much? There’s more to the story.

Most of Baxter’s revenue growth came from its acquisition of Hillrom in December 2021. Without this deal, the company’s revenue increased only 3% year over year excluding the impact of foreign exchange. 

CEO Joe Almeida noted that Baxter operated “amid unprecedented macroeconomic headwinds” during the second quarter. These headwinds appeared to especially weigh on the company’s acute therapies and biopharma solutions businesses, both of which experienced mid-single-digit revenue declines on a constant-currency basis.

Also, Baxter’s outlook for full-year 2022 was disappointing. The company’s previous guidance projected sales growth of 23% to 24% on a reported basis and 25% to 26% on a constant-currency basis. Baxter now expects full-year sales will increase in the high teens on a reported basis and in the mid-20s on a constant-currency basis.

The company previously anticipated adjusted earnings per share of between $4.12 and $4.20 for full-year 2022. Baxter’s updated guidance projects adjusted earnings per share will be between $3.60 and $3.70.

Now what

Baxter continues to face supply chain challenges and increased freight expenses due to higher fuel prices. The company’s ability to deliver stronger-than-expected growth going forward will depend in large part on whether or not these issues remain as problematic as they’ve been in recent months.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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