What Management Said
Read the full Q1 2026 transcript ↗Today, we'll discuss Baxter's first quarter results along with our financial outlook for the full year 2026. This morning, a press release was issued with our preliminary earnings results and reiterated outlook. During the call, we will be making forward-looking statements, including comments regarding our reiterated financial outlook for the full year 2026, and the anticipated drivers of the second quarter and second half 2026 performance. On the call, we will reference organic growth, which excludes the impact of foreign exchange, MSA revenues from Vantive, and impacts associated with business acquisitions or divestitures.
For the first quarter, financial results were in line with our overall expectations, and we are on track to deliver on our guidance for the full year. First quarter global sales from continuing operations totaled $2.7 billion, representing an increase of 3% year-over-year on a reported basis, and a decline of 1% on an organic basis. Adjusted earnings from continuing operations for the quarter were $0.36 per diluted share versus $0.55 in the prior year period. In the first quarter of 2025, we saw a one-time distributor build following Hurricane Helene, which benefited the MPT segment.
In the quarter, we saw the expected headwinds from both tariffs and higher manufacturing costs, including absorption pressure operating margin. While we did not see material impact from Novum LVP related returns in the quarter, we believe it's prudent to continue to factor this possibility into our full year guidance. We continue to work diligently to finalize hardware and software corrections to resolve the active field actions. Looking at the overall demand environment, we continue to believe we are in attractive end markets.
What went well
- First quarter results were in line with management's overall expectations, keeping Baxter on track to deliver its reiterated full-year 2026 guidance.
- Advanced Surgery grew 10% to $304 million, driven by continued strong demand and higher volumes for hemostats and sealants, strong commercial execution across regions, and steady procedure volumes.
- Drug Compounding grew 20%, reflecting continued strong demand for its services.
- Free cash flow was a positive $76 million, a significant improvement versus negative $221 million in the first quarter of 2025.
- Management did not see a material impact from Novum LVP returns or exchanges in the quarter, and noted a stabilization of returns.
- The turnaround is gaining traction through Baxter GPS, with over 230 continuous-improvement events completed in Q1, alongside new product launches including the Dynamo stretcher, IV Verify, the XR Spine table, and Novum Syringe.
What went wrong
- Adjusted earnings from continuing operations fell 35% to $0.36 per share from $0.55, reflecting an unfavorable comparison to Q1 2025, which benefited from a roughly $50 million timing shift in expense recognition (reclassification of certain functional costs from SG&A to cost of sales).
- Organic sales declined 1%, with adjusted gross margin down 500 basis points to 36.8% and adjusted operating margin down 390 basis points to 11%, hurt by tariffs and higher manufacturing costs including lower absorption.
- Infusion Therapies and Technologies declined 5%, reflecting lower Novum LVP pump sales due to the ongoing ship-and-installation hold and an unfavorable comparison to a one-time Hurricane Helene distributor build in IV solutions.
- Injectables and anesthesia sales fell 13%, hurt by supply constraints (including a contract-manufacturer disruption expected to limit supply into 2027), continued softness in pre-mixed products, and a low-double-digit decline in inhaled anesthesia.
- Front Line Care declined 4% on the timing of government orders and large customer deals plus planned global portfolio exits, contributing to HST sales declining 2%.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Organic sales growth | FY2026 | approximately flat (Reiterated) |
| Sales/EPS cadence | FY2026 | First half pressured year-over-year; growth weighted to the second half (Reiterated) |
| HST segment growth | FY2026 | Low single digits, back-half weighted (Reiterated) |
| Q2 top line | Q2 2026 | Sequential improvement vs Q1 but still pressured year-over-year (New) |
| Novum LVP | FY2026 | Guidance assumes the ship-and-installation hold remains in place all year and factors in possible returns (Reiterated) |
| Sales and earnings growth | FY2027 | Modest sales growth and modest earnings growth expected (no formal guidance) (New (preliminary)) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total sales | +3% reported, -1% organic ($2.7B) | Difficult prior-year comps including a one-time Hurricane Helene distributor build and a prior-year cost-timing benefit; tariffs and higher manufacturing costs |
| Adjusted EPS | -35% ($0.36 vs $0.55) | Unfavorable comparison to a ~$50M prior-year expense-timing benefit, plus tariffs and higher manufacturing costs including lower absorption |
| Advanced Surgery | +10% ($304M) | Strong demand and higher volumes for hemostats and sealants, strong commercial execution, steady procedure volumes |
| Infusion Therapies & Technologies | -5% ($981M) | Lower Novum LVP pump sales from the ship/installation hold and an unfavorable comp to a one-time IV solutions distributor build |
| Injectables & anesthesia | -13% ($301M) | Supply constraints including a contract-manufacturer disruption, softness in pre-mixed products, and a low-double-digit decline in inhaled anesthesia |
| Drug Compounding | +20% | Continued strong demand for compounding services |
| HST segment | -2% ($705M) | Front Line Care decline from order timing and planned portfolio exits; CCS flat |
| Pharmaceuticals segment | +1% ($621M) | Compounding growth offset by injectables/anesthesia weakness |
| Free cash flow | $76M vs -$221M | Improved versus the prior-year first quarter |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Turnaround / Baxter GPS | — | Stabilizing the business, strengthening the balance sheet, and continuous improvement; 230+ events in Q1 | Progressing |
| Novum LVP ship-and-installation hold | Risk of customer returns flagged | No material return impact yet; corrections still being finalized; hold assumed in place all year | Stable |
| Tariffs and manufacturing cost / absorption pressure | Anticipated headwind | Expected headwinds materialized, pressuring gross and operating margins | Worsening |
| Injectables supply constraints | Operations challenge flagged last quarter | Progress clearing back orders at one facility; contract-manufacturer disruption to limit supply into 2027 | Mixed |
| Innovation as a growth driver | — | Base-hit innovation cadence; launches of Dynamo, Connex 360, IV Verify, XR Spine, Novum Syringe | Building |
| Macro (oil, chips, Middle East) | — | Oil exposure under half of historical after the kidney divestiture; manageable at current levels; no material chip shortages; Middle East under 2% of revenue | Monitored |
| CFO transition | — | Anita Zielinski serving as interim CFO; search for a permanent successor underway | In progress |
Q&A Summary
How does Q1 translate into the reiterated full-year guide, and how should Q2 look given the street is near flat organic?
Q1 was in line with expectations; the Novum returns risk is still contemplated in guidance. Q2 should see sequential top-line improvement but remain pressured year-over-year on the same drivers (Novum, injectables); the full year remains approximately flat with first-half pressure and second-half improvement.
Looking to 2027 with TSAs/MSAs rolling off, can EPS grow, and what are the product drivers?
While not formally guiding, management expects modest sales growth and modest earnings growth in 2027, supported by new product launches such as Connex 360 and the Dynamo stretcher.
In MPT, beyond IV utilization stabilization, what gets the pump and disposables business back to growth given Novum dynamics?
Baxter launched Novum Syringe and continues to support Spectrum LVP with strong customer interest; pump revenue is expected to grow in the back half, with IV sets in line with that confidence.
What signposts give confidence in the significant back-half operating margin and growth ramp?
Confidence rests on normal business seasonality, strong customer interest, IV solutions right-sizing normalizing in 2026, and HST growing low single digits weighted to the back half.
What inflation (oil, freight, chips) is embedded in the 2026 margin guidance and how is it being absorbed?
After the kidney divestiture, oil exposure is under half of historical; if oil stays flat it is manageable with no material 2026 impact. The team is proactively managing the supply chain via dual sourcing and daily visual management; no material chip shortages have been experienced.
What is assumed for Novum returns, and is there upside if returns do not materialize?
The potential return risk has not been explicitly quantified; it has been immaterial to date but is prudently assumed. The total pump portfolio (Novum plus Spectrum) is less than 2% of sales, ring-fencing the exposure.
How should we think about the injectables and anesthesia recovery, and what is the status of the CFO search?
Pharma has been combined with ITT for synergies; one operations challenge has been mitigated, but a contract-manufacturer disruption will take time to resolve. The CFO search is well underway with strong interest, with Anita serving as interim CFO.
On the Novum fix, do you anticipate having to refile, and will you notify investors?
No updates today; guidance assumes the ship-and-hold stays in place all year. Baxter continues finalizing hardware and software corrections and will implement them with regulatory authorities, including any necessary submissions.
More on Baxter International Inc
Reported 2026-04-30 · figures from the Baxter International Inc Q1 2026 earnings call.
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