On Wednesday, Goldman Sachs (NYSE:GS) reiterated its Neutral rating on Baxter International (NYSE:BAX), maintaining the price target at $36.00. Following a fireside chat with Baxter's Executive Vice President & Chief Financial Officer Joel Grade, and Senior Vice President & Chief Investor Relations Officer Clare Trachtman, the firm expressed confidence in the company's operational fundamentals.
The discussion centered on Baxter's strategy and its focus on the upcoming separation of its Kidney Care business. The trajectory for revenue growth through 2024 was also a key topic, along with the company's pathway to achieving improved operating margins. Goldman Sachs is optimistic about Baxter's potential to reach approximately 17% operating margins by 2026, slightly above their estimate of 16.9%, citing a favorable mix, supply chain improvements, and pricing strategies as drivers.
The firm's outlook acknowledges the acceleration of organic revenue growth, projecting an increase of 4.4% in 2025 compared to 3.7% in 2024, excluding the Kidney Care segment. The anticipated expansion in operating margins is seen as a positive development for Baxter.
However, Goldman Sachs indicates that the future of Baxter's Kidney Care division is a pivotal factor for the company's stock valuation. The decision to either spin off or sell the Kidney Care business is seen as a significant event that requires further clarity before the firm can take a more definitive stance on Baxter's shares. The outcome of this decision is expected to play a critical role in shaping the company's financial landscape and strategic direction.
In other recent news, Baxter International Inc (NYSE:BAX). delivered robust financial results for the first quarter of 2024, with global sales experiencing a 2% increase on a reported basis and a 3% rise at constant currency rates. The company's diverse product demand and strategic pricing contributed to this growth, particularly in the Medical Products and Therapies segment, which saw a 6% surge, and the Pharmaceutical segment, which achieved an 11% growth. However, the Healthcare Systems & Technologies segment faced a 9% decline due to operational issues.
Furthermore, Baxter received FDA approval to expand the use of its Clinolipid to pediatric patients, including preterm and term neonates, extending the use of the product, previously available for adults since 2019, to patients of all ages who require intravenous nutrition.
In terms of analyst coverage, Goldman Sachs initiated coverage of Baxter, assigning a Neutral rating with a price target of $36.00, while UBS revised Baxter's price target to $40.00, down from the previous $42.00, maintaining a Neutral rating. TD Cowen downgraded Baxter's stock from Buy to Hold due to performance concerns in the Hospital Services and Technologies segment.
These are some of the recent developments surrounding Baxter International Inc.
InvestingPro Insights
As Baxter International (NYSE:BAX) navigates its strategic decisions, real-time data from InvestingPro offers a comprehensive view of the company's financial health. With a market capitalization of $16.97 billion, the company shows a strong shareholder yield, which is a positive sign for investors. Baxter's commitment to shareholder returns is further evidenced by its history of raising dividends for 7 consecutive years, and it has maintained dividend payments for an impressive 54 consecutive years, currently yielding 3.53%.
InvestingPro Tips suggest Baxter is a prominent player in the Healthcare Equipment & Supplies industry and is trading near its 52-week low, indicating a potential value opportunity for investors. Additionally, the company's net income is expected to grow this year, which could be a catalyst for stock appreciation. For those seeking more in-depth analysis, there are additional InvestingPro Tips available, and readers can use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
The company's revenue growth remains modest at 2.98% for the last twelve months as of Q1 2024, with a gross profit margin of 38.63%, reflecting its operational efficiency. These metrics, coupled with the insights from Goldman Sachs on the company's operational fundamentals and revenue growth trajectory, provide a well-rounded picture of Baxter's financial position and future outlook.
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