Key Highlights

  • Adjusted diluted EPS of USD 0.58 beat the consensus estimate of USD 0.52, while GAAP diluted EPS was USD 0.57.
  • Sales of USD 2.98 billion rose 5% on reported and organic bases, above the USD 2.91 billion consensus estimate.
  • Free cash flow reached USD 448 million, and a USD 600 million tender offer retired USD 864 million of debt.
  • Full year organic sales growth guidance rose to 3% to 4%, and adjusted EPS guidance to USD 2.05 to 2.15.

Baxter International Inc. (NYSE:BAX) reported third quarter 2026 adjusted diluted earnings per share of USD 0.58, above a consensus estimate of USD 0.52, with GAAP diluted EPS of USD 0.57 and GAAP net income of USD 298 million. Sales of USD 2.98 billion topped the consensus estimate of USD 2.91 billion and increased 5% on both a reported and organic basis. Adjusted EPS fell 16% from a year earlier, which the company tied to a higher effective tax rate after discrete tax benefits lifted the prior year quarter.

U.S. sales were about USD 1.6 billion, up 3% reported and 5% organic, while international sales were about USD 1.4 billion, up 7% reported and 6% organic. Chief Executive Officer Andrew Hider said results came in ahead of internal plans and pointed to growth in every division.

Segment Mix and Margin Detail

Medical Products and Therapies sales were about USD 2.1 billion, up 6%, with an adjusted operating margin of 20.9%, up 10 basis points. Advanced Surgery sales of USD 342 million grew 12%, and Drug Compounding services grew 9%. Injectables declined 3% on price deflation and manufacturing challenges at the Round Lake facility. Healthcare Systems and Technologies sales were USD 806 million, up 4%, with an adjusted operating margin of 17.2%, up 140 basis points.

Companywide adjusted gross margin was 38.3%, down 110 basis points on mix and lower pricing contribution. Adjusted selling, general and administrative expense was 21.4% of sales, an improvement of 80 basis points, and adjusted research and development was USD 118 million. Adjusted operating margin came in at 14.5%, down 40 basis points. The adjusted tax rate was 18.3%.

Raised Guidance and Round Lake Action

The company lifted full year reported sales growth guidance to 4% to 5% from 3% to 4%, organic growth to 3% to 4% from 2% to 3%, and adjusted EPS to USD 2.05 to 2.15 from USD 1.95 to 2.15. Adjusted operating margin guidance of 13% to 14% was kept, along with a tax rate of 18.5% to 19.5%. Nonoperating expense is now guided to USD 245 million to USD 255 million, and the average diluted share count to about 519 million.

Management also decided to discontinue cephalosporin production at Round Lake, Illinois, at the end of October, while supporting contracted customers into 2027. Those products represent roughly USD 50 million of sales and USD 30 million of operating income in 2026, and the quarter included USD 39 million of related restructuring costs. The company said the step addresses complexities referenced in an FDA warning letter tied to an inspection of the site earlier this year.

Balance Sheet and Dates to Track

Free cash flow was USD 448 million, bringing the year to date total to USD 705 million. The tender offer produced a pretax gain of about USD 253 million on debt extinguishment, excluded from adjusted results. Management targets net leverage of approximately 3 times by year end.

Several items mark the next reports. Net leverage against the 3 times target is one. Round Lake output after the end of October cephalosporin exit is another, along with response to the FDA warning letter. The third is the fourth quarter earnings call in February, when comprehensive 2027 guidance is scheduled. Fourth is the Vantive transition services income and reimbursements, guided at USD 165 million to USD 175 million for 2026, which the company said are broadly offset by related expenses.