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Here's Why You Should Retain Baxter Stock in Your Portfolio for Now
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Key Takeaways
Baxter is reshaping its portfolio as connected care and advanced surgery growth offset infusion headwinds.
Care & Connectivity sales rose 5% organically in Q2 2026, while Advanced Surgery climbed 12%.
Margins face pressure from manufacturing costs, tariffs, Novum IQ issues and China procurement pricing.
Baxter International (BAX - Free Report) is advancing its portfolio transformation with a focus on operational efficiency, connected-care growth and strengthening higher-growth businesses. While portfolio simplification, solid demand in select businesses and improving execution support its growth outlook, margin pressure from manufacturing costs, tariffs and pricing constraints, the Novum IQ regulatory and commercial issues, and procurement-related pressure in China remain key near-term headwinds.
Shares of this Zacks Rank #3 (Hold) company have gained 23% year to date against the industry's 21.3% decline. The S&P 500 Index has risen 12% during the same time frame.
BAX, with a market capitalization of $12.24 billion, is a global medical technology company providing items such as infusion pumps and intravenous solutions. The company has an earnings yield of 8.6% compared with the industry's 2.4%. It anticipates earnings to improve 3.2% over the next five years.
Image Source: Zacks Investment Research
Positive Factors Driving BAX’s Prospects
Large Addressable Markets Support Long-Term Growth: Baxter serves several sizeable healthcare markets through its continuing businesses, including infusion therapies, advanced surgery, drug compounding and connected care. The infusion pump market is valued at nearly $15 billion, while connected-care and digital monitoring represent a market exceeding $50 billion. Rising hospital admissions, procedure volumes, healthcare digitization and demand for efficient, patient-centric care provide structural growth opportunities across these markets.
Portfolio Simplification Strengthens Operational Focus: Baxter’s Kidney Care divestiture and second-quarter 2026 reporting changes have simplified its portfolio, including the consolidation of Pharmaceuticals with Infusion Therapies & Platforms. Management is deploying the Baxter Growth & Performance System to improve execution and efficiency. More than 400 continuous-improvement events were completed in the first half of 2026, with nearly 200 in progress and another 400 planned. These initiatives target working capital, manufacturing, commercial execution and R&D, supporting more disciplined resource allocation.
Advanced Surgery and Connected Care Drive Mix Improvement: Baxter’s higher-growth businesses are gaining momentum. Care & Connectivity Solutions sales increased 5% organically to $502 million in the second quarter of 2026, while Front Line Care grew 2%. Advanced Surgery sales rose 12% organically to $331 million, following 10% growth in the first quarter, while Drug Compounding also delivered double-digit growth. These businesses are strengthening portfolio mix and helping offset softer performance in certain infusion and injectable categories.
Key Challenges for BAX Stock
Margin Pressure Could Constrain Earnings: Baxter’s profitability remains pressured by higher manufacturing costs, lower absorption, tariffs and reduced pricing contribution. Adjusted gross margin fell 210 basis points year over year to 38.6% in the second quarter of 2026, while adjusted operating margin declined 90 basis points to 14.2%. Although a $75 million tariff refund benefited quarterly earnings, management expects about $40 million of net tariff impact in the second half. Failure to achieve planned cost savings and volume leverage could limit margin expansion.
Novum IQ Creates Execution and Regulatory Risk: The Novum IQ large-volume pump remains an overhang on Infusion Systems. Second-quarter sales were affected by the shipment and installation hold, customer returns and transitions to Spectrum. Baxter is in the early stages of verification testing after implementing corrective actions and continues to work with regulators. Until remediation is completed and commercial activity normalizes, Novum-related uncertainty could weigh on infusion-system sales and customer retention.
Pricing and China Procurement Add Pressure: Baxter faces limited pricing flexibility in hospital markets due to group purchasing organizations, tenders and large distributors. Lower pricing contribution already pressured Medical Products & Therapies margins in the second quarter, making it harder to offset tariffs, inflation and manufacturing costs. In China, value-based procurement can further reduce realized prices and pressure product mix. Intensifying procurement-driven price reductions or weaker hospital spending could weigh on Greater China performance and partially offset growth in other markets.
The Zacks Consensus Estimate for 2026 revenues is pegged at $11.62 billion, indicating a 3.3% improvement from the previous year’s level.
The consensus mark for adjusted earnings per share (EPS) is pinned at $2.04, indicating a 10.1% decrease from the year-ago reported number. The consensus estimate for adjusted EPS has improved 13 cents in the past 60 days.
Veracyte, currently sporting a Zacks Rank #1 (Strong Buy), reported a second-quarter 2026 adjusted earnings per share (EPS) of 54 cents, which surpassed the Zacks Consensus Estimate by 25.6%. Revenues of $150.3 million beat the Zacks Consensus Estimate by 4.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
VCYT has an estimated earnings growth rate of 8.4% for 2026. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 41.8%.
Globus Medical, currently flaunting a Zacks Rank #1, reported a second-quarter 2026 adjusted EPS of $1.34, which surpassed the Zacks Consensus Estimate by 19.6%. Revenues of $789.6 million beat the Zacks Consensus Estimate by 0.4%.
GMED has an estimated long-term earnings growth rate of 12.4%. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 27.9%.
Intuitive Surgical, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2026 adjusted EPS of $2.80, which beat the Zacks Consensus Estimate by 12.9%. Revenues of $2.89 billion surpassed the Zacks Consensus Estimate by 3.1%.
Intuitive Surgical has a long-term estimated growth rate of 14.9%. ISRG’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 16.5%.
View the Zacks #1 Rank List
Image: Bigstock
Here's Why You Should Retain Baxter Stock in Your Portfolio for Now
Key Takeaways
Baxter International (BAX - Free Report) is advancing its portfolio transformation with a focus on operational efficiency, connected-care growth and strengthening higher-growth businesses. While portfolio simplification, solid demand in select businesses and improving execution support its growth outlook, margin pressure from manufacturing costs, tariffs and pricing constraints, the Novum IQ regulatory and commercial issues, and procurement-related pressure in China remain key near-term headwinds.
Shares of this Zacks Rank #3 (Hold) company have gained 23% year to date against the industry's 21.3% decline. The S&P 500 Index has risen 12% during the same time frame.
BAX, with a market capitalization of $12.24 billion, is a global medical technology company providing items such as infusion pumps and intravenous solutions. The company has an earnings yield of 8.6% compared with the industry's 2.4%. It anticipates earnings to improve 3.2% over the next five years.
Image Source: Zacks Investment Research
Positive Factors Driving BAX’s Prospects
Large Addressable Markets Support Long-Term Growth: Baxter serves several sizeable healthcare markets through its continuing businesses, including infusion therapies, advanced surgery, drug compounding and connected care. The infusion pump market is valued at nearly $15 billion, while connected-care and digital monitoring represent a market exceeding $50 billion. Rising hospital admissions, procedure volumes, healthcare digitization and demand for efficient, patient-centric care provide structural growth opportunities across these markets.
Portfolio Simplification Strengthens Operational Focus: Baxter’s Kidney Care divestiture and second-quarter 2026 reporting changes have simplified its portfolio, including the consolidation of Pharmaceuticals with Infusion Therapies & Platforms. Management is deploying the Baxter Growth & Performance System to improve execution and efficiency. More than 400 continuous-improvement events were completed in the first half of 2026, with nearly 200 in progress and another 400 planned. These initiatives target working capital, manufacturing, commercial execution and R&D, supporting more disciplined resource allocation.
Advanced Surgery and Connected Care Drive Mix Improvement: Baxter’s higher-growth businesses are gaining momentum. Care & Connectivity Solutions sales increased 5% organically to $502 million in the second quarter of 2026, while Front Line Care grew 2%. Advanced Surgery sales rose 12% organically to $331 million, following 10% growth in the first quarter, while Drug Compounding also delivered double-digit growth. These businesses are strengthening portfolio mix and helping offset softer performance in certain infusion and injectable categories.
Key Challenges for BAX Stock
Margin Pressure Could Constrain Earnings: Baxter’s profitability remains pressured by higher manufacturing costs, lower absorption, tariffs and reduced pricing contribution. Adjusted gross margin fell 210 basis points year over year to 38.6% in the second quarter of 2026, while adjusted operating margin declined 90 basis points to 14.2%. Although a $75 million tariff refund benefited quarterly earnings, management expects about $40 million of net tariff impact in the second half. Failure to achieve planned cost savings and volume leverage could limit margin expansion.
Novum IQ Creates Execution and Regulatory Risk: The Novum IQ large-volume pump remains an overhang on Infusion Systems. Second-quarter sales were affected by the shipment and installation hold, customer returns and transitions to Spectrum. Baxter is in the early stages of verification testing after implementing corrective actions and continues to work with regulators. Until remediation is completed and commercial activity normalizes, Novum-related uncertainty could weigh on infusion-system sales and customer retention.
Pricing and China Procurement Add Pressure: Baxter faces limited pricing flexibility in hospital markets due to group purchasing organizations, tenders and large distributors. Lower pricing contribution already pressured Medical Products & Therapies margins in the second quarter, making it harder to offset tariffs, inflation and manufacturing costs. In China, value-based procurement can further reduce realized prices and pressure product mix. Intensifying procurement-driven price reductions or weaker hospital spending could weigh on Greater China performance and partially offset growth in other markets.
Baxter International Inc. Price
Baxter International Inc. price | Baxter International Inc. Quote
Estimate Trend
The Zacks Consensus Estimate for 2026 revenues is pegged at $11.62 billion, indicating a 3.3% improvement from the previous year’s level.
The consensus mark for adjusted earnings per share (EPS) is pinned at $2.04, indicating a 10.1% decrease from the year-ago reported number. The consensus estimate for adjusted EPS has improved 13 cents in the past 60 days.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Veracyte (VCYT - Free Report) , Globus Medical (GMED - Free Report) and Intuitive Surgical (ISRG - Free Report) .
Veracyte, currently sporting a Zacks Rank #1 (Strong Buy), reported a second-quarter 2026 adjusted earnings per share (EPS) of 54 cents, which surpassed the Zacks Consensus Estimate by 25.6%. Revenues of $150.3 million beat the Zacks Consensus Estimate by 4.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
VCYT has an estimated earnings growth rate of 8.4% for 2026. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 41.8%.
Globus Medical, currently flaunting a Zacks Rank #1, reported a second-quarter 2026 adjusted EPS of $1.34, which surpassed the Zacks Consensus Estimate by 19.6%. Revenues of $789.6 million beat the Zacks Consensus Estimate by 0.4%.
GMED has an estimated long-term earnings growth rate of 12.4%. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 27.9%.
Intuitive Surgical, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2026 adjusted EPS of $2.80, which beat the Zacks Consensus Estimate by 12.9%. Revenues of $2.89 billion surpassed the Zacks Consensus Estimate by 3.1%.
Intuitive Surgical has a long-term estimated growth rate of 14.9%. ISRG’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 16.5%.