Oct 29, 2026 earnings call — Turnaround progress and updated outlook
Raised full-year organic sales growth to 3% to 4% and adjusted EPS to $2.05 to $2.15.
Revenue $3.0B (est $2.9B) · EPS $0.58 (est $0.52)
Key quotes
"As part of these efforts, we are discontinuing production of cephalosporin products at the end of October, but will continue to support customers under contract into 2027."
"Third quarter free cash flow totaled $448 million, improving sequentially from the second quarter and bringing our year-to-date total to $705 million."
"Baxter GPS is becoming increasingly integrated into how we operate, strengthening productivity, execution, discipline and accountability."
Analyst Q&A 8
Product stop and M&A plan
Q (Travis Steed · BofA): Why did you stop the ceph product and how large is the 2026 hit? Also outline M&A areas, deal size, and effect on earnings.
A: Management said they are repositioning the Round Lake site to make only non-ceph products so operations are simpler and more resilient. They also said free cash flow and a target of approximately 3x leverage enable M&A, and they will pursue deals using four criteria including strategic fit, markets, integration and financial return; tuck-ins and areas like cardiac monitoring and Advanced Surgery are of interest.
"And by doing this process, by walking through this, we're repositioning our Round Lake exclusively for a non-ceph production." — Andrew Hider (CEO)
Priorities and guidance timing
Q (Larry Biegelsen · Wells Fargo): Where will the new CEO focus first, will he repeat past margin/cash playbooks, and how will you approach 2027 guidance?
A: He said he will spend weeks getting up to speed with the business, focus on margin mix, operational and functional efficiencies, and sharpen capital allocation including M&A, R&D, manufacturing investment and opportunistic buybacks. He said they will not give 2027 guidance today and will set detailed guidance at the Q4 earnings call in February.
"One thing that Andrew and I will be working on over the coming weeks and months is how we hone our capital allocation policy." — John Rogers (CFO)
Sustainability of growth and 2027 margins
Q (Vijay Kumar · Evercore): Is the Q4 implied mid-single growth sustainable and what may change for 2027 on growth and margins?
A: They said Q4 guidance implies a similar level of growth as Q3, around 5%, driven by Infusion Systems, IV Solutions, HST, Advanced Surgery and Drug Compounding, and a similar operating margin strength is expected in Q4. Management noted there are puts and takes for 2027—headwinds like tariffs, TSA and product exits and tailwinds from cost savings—but they will give net detail in February.
"As we think about Q4, our updated guidance implies a similar level of growth in Q4." — Kevin Moran
Injectables production and contract maker
Q (Patrick Andrew Wood · UBS): Will the generic injectables business face constraints or tailwinds and what is the size/timing of the contract manufacturer issue?
A: They said moving Round Lake to non-ceph production simplifies operations and supports better supply resiliency, which aligns the site to its future role. On the contract manufacturer, they said they have made good progress, are staying close to that manufacturer, and are working to mitigate the issue over time, but they did not give a total impact amount.
"By going to the non-ceph production, it really does allow us and enables us to simplify our operations." — Andrew Hider (CEO)
Advanced Surgery growth drivers
Q (Joanne Wuensch · Citi): What drove double-digit Advanced Surgery growth and is any of it one-time?
A: They said market growth is low- to mid-single digits and the team is expanding globally, but part of the strong performance also came from a competitor supply challenge that they captured. Management warned comps will be tougher year-over-year but said the team is focused on continuing to drive the business.
"Number three, there's been, and this is not a small piece. There's been a competitor that's had a challenge with supply." — Andrew Hider (CEO)
Inflation drivers and offsets
Q (Lilia-Celine Lozada · JPMorgan): What cost pressures do you see for 2027 and how will you offset them?
A: They said inflationary pressures look slightly higher in 2027, with the biggest drivers being salary inflation, electronics and materials costs, and more distant pressure from utilities, energy, plastics, transportation, metals and packaging. Management said they have a strong pipeline of savings and aim to neutralize inflation with efficiency programs, and noted lower exposure to fuel and oil after the Kidney Care divestiture.
"But the key ones are actually in order of impact, I think, are salary inflation, electronics and materials costs." — John Rogers (CFO)
Cost cuts, pricing and pump progress
Q (Frederick Wise · Stifel): Explain plans to improve cost structure, the lower pricing contribution, and status of pump/Novum milestones.
A: They said there is already much work reducing costs and inefficiencies across operations, supply chain, IT and finance, and they see opportunities to simplify and standardize systems to build a multi-year pipeline of savings. On pricing, management said there was less contribution year-over-year because last year included outsized GPO renewal benefits impacting the MPT segment; on Novum LVP they said progress continues and they are working closely with regulators and will update when they can.
"The commentary was when you think about operating income dollars year-over-year, there was less contribution from pricing." — Kevin Moran
Tariffs and pharma supply offsets
Q (Jayson Bedford · Raymond James & Associates): Would you consider onshoring for tariff relief and how much could supply improvements offset ceph discontinuation?
A: They said they continue to look for ways to minimize tariff impact and noted their strong U.S. footprint, but there is no headline decision now. On supply offsets for the ceph discontinuation, they said they are not outlining total offsets today but cited support from the contract manufacturer and other products they are enabling for customers and will show more next year.
"As far as tariffs go, we continue to look at opportunities that we can, I would say, maximize or minimize the impact." — Andrew Hider (CEO)