Restructuring and spinoff
Baxter International said on Thursday that it’s moving forward with a restructuring and plans to spin off its kidney care business.
The Deerfield, Ill.-based company last week reorganized into four broader segments — medical products and therapies, healthcare systems and technologies, pharmaceuticals and biopharma solutions and kidney care — as part of a broader plan to simplify its operations.
Its kidney care business, which brought in revenue of about $4.5 billion last year, is still on track to be turned into a separate, publicly traded company by July 2024, the company said. Baxter also is finalizing a search for a CEO to lead the new venture.
CEO José Almeida also commented on reports that Baxter may be looking to sell its biopharma solutions unit.
“We have experienced significant interest in this business,” Almeida said in a Thursday call with investors and analysts. “We still are exploring strategic alternatives and we'll let you folks know as to when we make that decision.”
If there is a sale, the proceeds mostly will be directed to debt repayment, Almeida added.
Q1 trends
After a “difficult 2022” that resulted in the company planning 3,000 job cuts, Baxter started this year on “strong footing,” Almeida said on the call.
“While the higher rates of inflation we absorbed last year continue to impact our performance … we're beginning to see more stability in the overall market,” he added, noting that improvements in the function of the company’s supply chain, particularly for electromechanical components, have made operations more predictable.
Baxter reported a 2% decrease in revenue in the first quarter, an improvement from its forecasted 3% decrease. Adjusted earnings per share of 59 cents also came in above the company’s expected range of 46 to 50 cents. Net income decreased 38%, which CFO Jay Saccaro said was due to inflation driving up costs of materials, labor and freight.
Stifel analyst Rick Wise wrote in a research note on Thursday that the results were a “respectable start to the year,” adding that “the first quarter outperformance seems to offer an early encouraging signal of Baxter’s stabilizing-to-improving outlook as we await further evidence that the company’s strategic transformation is taking hold.”
Forecast
Baxter “modestly raised guidance” for 2023, “likely to reflect 1Q outperformance, while still maintaining forward conservatism,” analysts with KeyBanc Capital Markets wrote in a research note.
For 2023, Baxter expects sales growth of 1% to 2%. It also forecasts earnings per diluted share of $1.16 to $1.31.
For the second quarter, the company expects sales growth of 1% to 2% and earnings per diluted share of $0.18 to $0.20.
