Baxter International Inc.

Baxter said second-quarter 2026 global sales were approximately $3 billion, up 5% reported and 5% organically. Adjusted earnings were $0.56 per diluted share versus $0.59 a year ago, with the decline attributed to known mechanical headwinds, partially offset by a $75 million IEEPA tariff refund that contributed about $0.11 per share. Adjusted gross margin was 38.6%, down 210 basis points; adjusted operating margin was 14.2%, down 90 basis points. For the full year 2026, management raised total reported sales growth guidance to 3% to 4%, organic sales growth to 2% to 3%, and adjusted EPS to $1.95 to $2.15 from $1.85 to $2.05. Full-year adjusted operating margin remains expected at 13% to 14%, and second-half tariffs are still expected to have about a $40 million impact net of mitigation.

CEO Andrew Hider said the quarter showed “continued steady progress” and better execution across the business, with broad-based growth in every segment. He emphasized that Baxter is still early in its turnaround, but that the company is building momentum through its three priorities: stabilizing the business, strengthening the balance sheet, and driving continuous improvement via Baxter GPS. His tone was positive but restrained, repeatedly stressing that one quarter does not define the story and that the focus is on execution in the second half and into 2027.

Interim CFO Anita Zielinski highlighted the main financial drivers: higher manufacturing costs, lower absorption, unfavorable tariff and cost-timing comparisons, and a lower contribution from pricing, partly offset by the tariff refund and higher volumes. She noted adjusted SG&A was $648 million, or 21.9% of sales, adjusted R&D was $125 million, and net interest and other expense was $59 million. She also said Q2 free cash flow was $181 million, reflecting better working capital execution, and reiterated the target of approximately 3x net leverage by year-end. For the second half, she pointed to higher volumes, cost actions already underway, and the roll-off of higher-cost inventory as the basis for margin improvement.

Analysts pressed management on how much of the Q2 outperformance came from one-time items, especially the $75 million tariff refund, TSA income, and the stronger mix from Drug Compounding. Management said Drug Compounding was “a good chunk” of the beat, but that its lower margin affects mix; they also said TSA income was offset by higher TSA-related expenses, so it was not a material net earnings driver. Several questions focused on Novum IQ LVP, injectables, and hospital capex; management said it is making progress on Novum verification testing, still supports customers with mitigations, and does not see a material change in hospital spending or buying behavior, while acknowledging ongoing supply constraints in injectables and certain contract-manufactured products.