Baxter International has undergone a dramatic transformation over the past two years, shedding major business units to create a more focused medical technology company. These strategic decisions have shifted the firm from a diversified healthcare company with a significant kidney care component to a more streamlined organization focused on specialized hospital equipment and pharmaceutical products.
The financial implications of this transformation are substantial. The combined proceeds from these divestitures will enable significant debt reduction, strengthening the company’s balance sheet and providing greater financial flexibility for future growth initiatives.
What’s more, the stock trades at 13.4 times projected 2025 earnings and offers good value given the long-term strategic rationale for its sustainable growth.
BAXTER INTERNATIONAL INC. (New York symbol BAX; www.baxter.com) is a medical device maker which has narrowed its focus in the past few years.
In September 2023, the company sold for $4.25 billion (or $3.4 billion after taxes) its BioPharma division, whose products and services help drugmakers manufacture their products.
On February 1, 2025, Baxter completed the sale of its Renal Care and Acute Therapies unit to investment firm Carlyle Group Inc. (New York symbol CG). Called Vantive, that business makes kidney dialysis machines and related equipment; it accounted for 30% of Baxter’s total revenue.
The company originally planned to hand out shares in Vantive to its own shareholders later this year, but it ultimately opted for the sale instead.
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Baxter received $3.8 billion for Vantive. It will use the cash to pay down its long-term debt of $10.4 billion (as of December 31, 2024); that amount is equal to 61% of the company’s market cap.
As a result of these moves, Baxter now focuses on specialized equipment for hospitals, including intensive-care-unit beds, operating tables, patient monitoring equipment and electronic diagnostic systems.
Baxter: Trading at just 13.4x forward earnings despite strong market position
In the quarter ended December 31, 2024, the company’s sales rose 0.9%, to $2.75 billion from $2.73 billion, a year earlier. Sales were slowed an unfavorable impact from Hurricane Helene on Baxter’s North Cove operations and related production. That included a $150 million-$160 million reduction at the Medical Products and Therapies business and a $40 million-$50 million impact to Kidney Care sales.
Excluding one-time items, Baxter made $297 million, or $ 0.58 a share, down 11.1% from $330 million or $0.65.
Baxter will probably earn $2.49 a share for all of 2025. The stock trades at 13.4 times that estimate. We see that p/e as low in light of the company’s high market share and high
research spending (4% of revenue).
As a result of the recent asset sales, Baxter cut its quarterly dividend by 58.6%; the new annual rate of $0.68 still yields a solid 2.0%.
Recommendation in Spinoffs & Takeovers: Baxter International Inc. is a buy.
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