Baxter Raises 2026 Outlook as Q3 Sales Rise 5%

Baxter International Inc. (NYSE: BAX) raised its full-year 2026 sales and adjusted earnings outlook after third-quarter revenue increased 5%, supported by growth across its principal operating divisions. Adjusted earnings declined from a year earlier as a higher effective tax rate offset the benefit of increased sales.

The medical-products company now expects full-year reported sales growth of 4% to 5%, compared with its previous outlook of 3% to 4%. It forecasts organic sales growth of 3% to 4%, up from 2% to 3%, and adjusted diluted earnings from continuing operations of $2.05 to $2.15 per share, narrowing and lifting the lower end of its prior $1.95-to-$2.15 range.

Third-quarter net sales from continuing operations totaled $2.98 billion, rising 5% on both a reported and organic basis. Organic growth excludes the impact of the Kidney Care manufacturing and supply agreement, acquisitions and divestitures, and currency movements.

Adjusted diluted earnings from continuing operations were $0.58 per share, down 16% from $0.69 a year earlier. Baxter attributed the decline to a higher year-over-year effective tax rate. Adjusted gross margin contracted 110 basis points to 38.3%, while adjusted operating margin decreased 40 basis points to 14.5%.

On a U.S. GAAP basis, Baxter reported third-quarter net income attributable to stockholders of $294 million, or $0.57 per diluted share. The results included a gain from the early extinguishment of debt, along with adjustments for intangible-asset amortization, business-optimization programs, transformation costs, tax matters and other items.

Advanced Surgery Leads Divisional Growth

Medical Products & Therapies, Baxter’s largest segment, generated third-quarter sales of $2.10 billion, up 6%. Segment operating income increased 7% to $439 million, and operating margin edged up 10 basis points to 20.9%, as lower selling, general and administrative expenses as a percentage of sales offset a 90-basis-point decline in gross margin.

Within the segment, Infusion Therapies & Platforms sales rose 4% organically to $1.76 billion. Growth in Infusion Systems, Drug Compounding and IV solutions was partly offset by lower Injectables sales. Advanced Surgery revenue climbed 12% organically to $342 million, reflecting demand for hemostats and sealants, commercial execution across regions and steady procedure volumes.

Healthcare Systems & Technologies posted sales of $806 million, up 4% on both a reported and organic basis. Operating income increased 14% to $139 million, while operating margin expanded 140 basis points to 17.2%. Lower SG&A and research-and-development expenses as percentages of sales more than offset a 160-basis-point contraction in gross margin.

Care & Connectivity Solutions sales increased 5% organically to $498 million, supported by Global Surgical Solutions and Patient Support Systems, including execution against the U.S. backlog and strength in international markets. Front Line Care revenue rose 3% organically to $308 million as demand for Connex 360 supported Connected Monitoring, partly offset by planned global product exits.

For the first nine months of 2026, Baxter recorded sales of $8.64 billion, up 4% as reported and 3% organically. Adjusted diluted earnings from continuing operations were $1.51 per share, compared with $1.83 in the prior-year period.

Cash Flow and Balance-Sheet Priorities

Cash flow from continuing operations reached $558 million in the third quarter. After $110 million of capital expenditures, free cash flow was $448 million. Nine-month free cash flow totaled $705 million, compared with negative $18 million a year earlier.

Baxter said its cash generation and a debt tender offer completed during the quarter supported its confidence in reaching net leverage of about 3.0 times by the end of 2026. Strengthening the balance sheet remains a near-term priority, and the company said it is committed to maintaining an investment-grade credit rating.

The company plans to continue investing organically in core platforms and innovation, with capital spending increasingly directed toward growth and productivity projects. Baxter expects to maintain its current quarterly dividend. It said strategic tuck-in acquisitions and opportunistic share repurchases would be considered after it achieves its targeted leverage ratio.

Updated 2026 Assumptions

Baxter now expects Medical Products & Therapies to deliver low-to-mid-single-digit organic growth in 2026, compared with its previous low-single-digit forecast. The outlook for Healthcare Systems & Technologies remains low-single-digit organic growth.

The company maintained its expected adjusted operating margin range of 13% to 14% and adjusted tax-rate range of 18.5% to 19.5%. Its assumptions include an approximately $80 million tariff impact, net of mitigating actions, and a roughly 100-basis-point contribution to reported revenue growth from foreign exchange.

Baxter increased its forecast for transition-service-agreement income and other Vantive-related reimbursements to $165 million to $175 million from $155 million to $165 million. It lowered its expected interest and other expense range to $245 million to $255 million from $260 million to $280 million.

The updated outlook remains subject to competition, pricing pressure, inflation, tariffs and trade-policy changes, geopolitical developments, foreign-exchange and interest-rate movements, and possible supply-chain or manufacturing disruptions. Baxter also identified product-quality and regulatory matters—including issues involving the Novum IQ large-volume pump and an FDA warning letter—as risks. Significant debt, integration and separation risks, healthcare reimbursement changes, cybersecurity threats and the company’s ability to achieve planned operating efficiencies could also affect results.