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BAXTER INTERNATIONAL INC 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Baxter International Inc.

Filing date:

02/21/2025

TLDR:

Baxter International Inc.’s 2024 10-K filing reveals a 3% increase in net sales but a net loss attributable to Baxter stockholders. The company is undergoing strategic actions, including the sale of the Kidney Care business, while facing risks related to global economic conditions and regulatory compliance.

ELI5:

Baxter, a medical company, had a slight increase in sales but lost money overall. They’re selling off part of their business and dealing with economic problems and rules.

Accession #:

0001628280-25-007201

Published on

Analyst Summary

  • Net sales increased by 3% to $10.64 billion in 2024.
  • Net loss attributable to Baxter stockholders was $(649) million, or $(1.27) per diluted share.
  • Cash and cash equivalents were $1.76 billion as of December 31, 2024.
  • Total assets were $25.78 billion as of December 31, 2024.
  • Total liabilities were $18.76 billion as of December 31, 2024.
  • Total stockholders’ equity was $6.96 billion as of December 31, 2024.
  • Operating cash flow from continuing operations was $819 million in 2024.
  • Capital expenditures were $446 million in 2024.
  • Debt repayments were $2.66 billion in 2024.
  • Gross Profit Margin: 37.46%, a decrease of 6.47% from the previous year.
  • Operating Profit Margin: 0.13%, a decrease of 98.09% from the previous year.
  • Net Profit Margin: -6.00%, a decrease of 123.34% from the previous year.
  • Return on Assets (ROA): -2.47%, a decrease of 126.22% from the previous year.
  • Return on Equity (ROE): -9.32%, a decrease of 129.48% from the previous year.
  • Current Ratio: 1.36, a decrease of 8.11% from the previous year.
  • Quick Ratio: 1.05, a decrease of 10.26% from the previous year.
  • Cash Ratio: 0.27, a decrease of 42.55% from the previous year.
  • Debt-to-Equity Ratio: 2.67, an increase of 14.10% from the previous year.
  • Debt-to-Assets Ratio: 0.73, an increase of 4.29% from the previous year.
  • Interest Coverage Ratio: 0.04, a decrease of 97.52% from the previous year.
  • Inventory Turnover: 3.36, an increase of 3.70% from the previous year.
  • Days Sales Outstanding (DSO): 57.65 days, a decrease of 4.84% from the previous year.
  • Asset Turnover: 0.41, an increase of 10.81% from the previous year.
  • Price-to-Earnings Ratio (P/E): -26.50
  • Price-to-Book Ratio (P/B): 2.44
  • Price-to-Sales Ratio (P/S): 1.61
  • Enterprise Value to EBITDA (EV/EBITDA): 18.19
  • Revenue Growth: 2.66%
  • Net Income Growth: -123.96%
  • EPS Growth: -124.19%
  • Goodwill impairments of $425 million were recorded in 2024.

Opportunities and Risks

  • Global economic conditions, including inflation and supply chain disruptions.
  • Difficulties with the integration of Hillrom.
  • Substantial competition and pricing pressures.
  • Regulatory compliance and potential fines or damages.
  • Cybersecurity breaches and data leakage.
  • Climate change and related regulations.
  • Innovation in connected care and core therapy offerings.
  • Geographic expansion and portfolio optimization.
  • Operational efficiencies through automation and digitization.
  • Disciplined capital allocation and debt repayment.

Potential Implications

Stock Price

  • A hold rating is recommended, pending further assessment of the impact of strategic actions and macroeconomic factors.
  • Investors should monitor the company’s progress in deleveraging, managing costs, and navigating regulatory hurdles.

Baxter International Inc. (BAX) – 2024 10-K Filing Report

Executive Summary

This report analyzes Baxter International Inc.’s 2024 10-K filing. Key findings include a 3% increase in net sales, a net loss attributable to Baxter stockholders, and strategic actions including the sale of the Kidney Care business. The company faces risks related to global economic conditions, supply chain disruptions, and regulatory compliance. A hold rating is recommended, pending further assessment of the impact of strategic actions and macroeconomic factors.

Company Overview

Baxter International Inc. (BAX) is a global medical technology company providing a broad portfolio of essential healthcare products. The company operates in three reportable segments: Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals. Recent strategic actions include the sale of the Kidney Care business and the implementation of a new operating model.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights strategic actions aimed at increasing stockholder value, including the Kidney Care business sale and the new operating model. The MD&A discusses challenges related to global economic conditions, supply chain disruptions, and regulatory compliance. Management expresses commitment to deleveraging and disciplined capital allocation.

Financial Statement Analysis

Income Statement

  • Net sales increased by 3% to $10.64 billion in 2024.
  • Net loss attributable to Baxter stockholders was $(649) million, or $(1.27) per diluted share.
  • R&D expenses were $590 million in 2024.

Key Ratios

Detailed financial ratios are not provided in the extracted text. However, the report mentions gross margin ratio, SG&A expense ratio, and R&D expense ratio, indicating their importance in assessing Baxter’s financial performance.

Balance Sheet

  • Cash and cash equivalents were $1.76 billion as of December 31, 2024.
  • Total assets were $25.78 billion as of December 31, 2024.
  • Total liabilities were $18.76 billion as of December 31, 2024.
  • Total stockholders’ equity was $6.96 billion as of December 31, 2024.

Cash Flow Statement

  • Operating cash flow from continuing operations was $819 million in 2024.
  • Capital expenditures were $446 million in 2024.
  • Debt repayments were $2.66 billion in 2024.

Risk and Opportunity Assessment

Risks

  • Global economic conditions, including inflation and supply chain disruptions.
  • Difficulties with the integration of Hillrom.
  • Substantial competition and pricing pressures.
  • Regulatory compliance and potential fines or damages.
  • Cybersecurity breaches and data leakage.
  • Climate change and related regulations.

Opportunities

  • Innovation in connected care and core therapy offerings.
  • Geographic expansion and portfolio optimization.
  • Operational efficiencies through automation and digitization.
  • Disciplined capital allocation and debt repayment.

Red Flags and Uncommon Metrics

  • Goodwill impairment charges, particularly related to the Healthcare Systems & Technologies segment.
  • Ongoing legal proceedings and potential liabilities.
  • Supply chain disruptions and increased costs.

Conclusion and Actionable Insights

Baxter International faces challenges related to economic conditions, integration efforts, and regulatory compliance. However, the company is pursuing opportunities for growth through innovation and operational efficiencies. A hold rating is recommended, pending further assessment of the impact of strategic actions and macroeconomic factors. Investors should monitor the company’s progress in deleveraging, managing costs, and navigating regulatory hurdles.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Calculation: Gross Profit / Net Sales = $3,984 / $10,636 = 37.46%
    • Trend: Previous year Gross Profit Margin was 40.05%. Percentage change: (37.46% – 40.05%) / 40.05% = -6.47%
    • Industry: The medical equipment and supplies industry typically sees gross profit margins between 40% and 60%. Baxter’s 37.46% is below the lower end of this range.
  • Operating Profit Margin

    • Calculation: Operating Income / Net Sales = $14 / $10,636 = 0.13%
    • Trend: Previous year Operating Profit Margin was 6.82%. Percentage change: (0.13% – 6.82%) / 6.82% = -98.09%
    • Industry: The medical equipment and supplies industry typically sees operating profit margins between 10% and 20%. Baxter’s 0.13% is significantly below this range.
  • Net Profit Margin

    • Calculation: Net Income / Net Sales = $(638) / $10,636 = -6.00%
    • Trend: Previous year Net Profit Margin was 25.71%. Percentage change: (-6.00% – 25.71%) / 25.71% = -123.34%
    • Industry: The medical equipment and supplies industry typically sees net profit margins between 5% and 15%. Baxter’s -6.00% is significantly below this range.
  • Return on Assets (ROA)

    • Calculation: Net Income / Total Assets = $(638) / $25,782 = -2.47%
    • Trend: Previous year ROA was 9.42%. Percentage change: (-2.47% – 9.42%) / 9.42% = -126.22%
    • Industry: The medical equipment and supplies industry typically sees ROA between 3% and 8%. Baxter’s -2.47% is significantly below this range.
  • Return on Equity (ROE)

    • Calculation: Net Income Attributable to Baxter Stockholders / Total Baxter Stockholders’ Equity = $(649) / $6,964 = -9.32%
    • Trend: Previous year ROE was 31.61%. Percentage change: (-9.32% – 31.61%) / 31.61% = -129.48%
    • Industry: The medical equipment and supplies industry typically sees ROE between 8% and 15%. Baxter’s -9.32% is significantly below this range.
  • Earnings Per Share (EPS)

    • Basic: $(1.27)
    • Diluted: $(1.27)
    • Trend: Previous year Basic EPS was $5.25. Percentage change: (-$1.27 – $5.25) / $5.25 = -124.19%
    • Trend: Previous year Diluted EPS was $5.23. Percentage change: (-$1.27 – $5.23) / $5.23 = -124.28%
    • Industry: EPS varies widely, but negative EPS indicates underperformance compared to industry peers with positive earnings.

Liquidity

  • Current Ratio

    • Calculation: Current Assets / Current Liabilities = $8,853 / $6,511 = 1.36
    • Trend: Previous year Current Ratio was 1.48. Percentage change: (1.36 – 1.48) / 1.48 = -8.11%
    • Industry: A current ratio between 1.5 and 2.0 is generally considered healthy. Baxter’s 1.36 is slightly below the ideal range.
  • Quick Ratio (Acid-Test Ratio)

    • Calculation: (Current Assets – Inventories) / Current Liabilities = ($8,853 – $2,046) / $6,511 = 1.05
    • Trend: Previous year Quick Ratio was 1.17. Percentage change: (1.05 – 1.17) / 1.17 = -10.26%
    • Industry: A quick ratio of 1.0 or greater is generally considered acceptable. Baxter’s 1.05 is at the lower end of acceptable.
  • Cash Ratio

    • Calculation: Cash and Cash Equivalents / Current Liabilities = $1,764 / $6,511 = 0.27
    • Trend: Previous year Cash Ratio was 0.47. Percentage change: (0.27 – 0.47) / 0.47 = -42.55%
    • Industry: A cash ratio of 0.5 or greater is generally considered ideal, but acceptable can be lower. Baxter’s 0.27 is low.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Calculation: Total Liabilities / Total Equity = $18,758 / $7,024 = 2.67
    • Trend: Previous year Debt-to-Equity Ratio was 2.34. Percentage change: (2.67 – 2.34) / 2.34 = 14.10%
    • Industry: A debt-to-equity ratio of 1 to 1.5 is generally considered healthy. Baxter’s 2.67 is high, indicating significant leverage.
  • Debt-to-Assets Ratio

    • Calculation: Total Liabilities / Total Assets = $18,758 / $25,782 = 0.73
    • Trend: Previous year Debt-to-Assets Ratio was 0.70. Percentage change: (0.73 – 0.70) / 0.70 = 4.29%
    • Industry: A debt-to-assets ratio below 0.6 is generally considered healthy. Baxter’s 0.73 is high, indicating significant leverage.
  • Interest Coverage Ratio (Times Interest Earned)

    • Calculation: Operating Income / Interest Expense, Net = $14 / $341 = 0.04
    • Trend: Previous year Interest Coverage Ratio was 1.61. Percentage change: (0.04 – 1.61) / 1.61 = -97.52%
    • Industry: An interest coverage ratio of 3.0 or greater is generally considered healthy. Baxter’s 0.04 is extremely low, indicating difficulty in covering interest expenses.

Activity/Efficiency

  • Inventory Turnover

    • Calculation: Cost of Goods Sold / Average Inventory = $6,652 / (($2,046 + $1,918) / 2) = 3.36
    • Trend: Previous year Inventory Turnover was 3.24. Percentage change: (3.36 – 3.24) / 3.24 = 3.70%
    • Industry: Inventory turnover varies widely within the medical supplies industry, but a typical range is 3-6. Baxter’s 3.36 is within this range.
  • Days Sales Outstanding (DSO)

    • Calculation: (Accounts Receivable / Net Sales) * 365 = ($1,679 / $10,636) * 365 = 57.65 days
    • Trend: Previous year DSO was 60.58 days. Percentage change: (57.65 – 60.58) / 60.58 = -4.84%
    • Industry: DSO varies, but a typical range for medical supplies is 30-60 days. Baxter’s 57.65 days is within this range.
  • Days Payable Outstanding (DPO)

    • Calculation: (Accounts Payable / Cost of Goods Sold) * 365 = ($968 / $6,652) * 365 = 53.15 days
    • Industry: DPO varies, but a typical range is 30-60 days. Baxter’s 53.15 days is within this range.
  • Asset Turnover

    • Calculation: Net Sales / Total Assets = $10,636 / $25,782 = 0.41
    • Trend: Previous year Asset Turnover was 0.37. Percentage change: (0.41 – 0.37) / 0.37 = 10.81%
    • Industry: Asset turnover varies, but a typical range is 0.5-1.5. Baxter’s 0.41 is below this range, indicating inefficient asset utilization.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Calculation: Stock Price / EPS = $33.66 / abs(-$1.27) = -26.50
    • Industry: A negative P/E ratio is not meaningful for comparison.
  • Price-to-Book Ratio (P/B)

    • Calculation: Market Cap / Total Equity = (510 * $33.66) / $7,024 = 2.44
    • Industry: P/B ratios typically range from 1-3. Baxter’s 2.44 is within this range.
  • Price-to-Sales Ratio (P/S)

    • Calculation: Market Cap / Net Sales = (510 * $33.66) / $10,636 = 1.61
    • Industry: P/S ratios typically range from 1-3. Baxter’s 1.61 is within this range.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Calculation: (Market Cap + Total Debt – Cash) / (Operating Income + Depreciation and Amortization) = ((510 * $33.66) + $13,126 – $1,764) / ($14 + $997) = 18.19
    • Industry: EV/EBITDA ratios typically range from 10-15. Baxter’s 18.19 is above this range.

Growth Rates

  • Revenue Growth

    • Calculation: ($10,636 – $10,360) / $10,360 = 2.66%
  • Net Income Growth

    • Calculation: ($(638) – $2,663) / $2,663 = -123.96%
  • EPS Growth

    • Calculation: ((-$1.27) – $5.25) / $5.25 = -124.19%

Other Relevant Metrics

  • Goodwill Impairments

    • In 2024, Baxter recorded goodwill impairments of $425 million, compared to none in 2023 and $2,812 million in 2022. This indicates a significant write-down of the value of acquired assets, particularly impacting the Healthcare Systems & Technologies segment.
  • Discontinued Operations

    • Baxter’s income (loss) from discontinued operations significantly impacts the overall net income. The sale of BioPharma Solutions to Permira Funds was completed in 2024.
  • Business Optimization Charges

    • Baxter continues to incur significant business optimization charges related to restructuring and cost-saving initiatives. These charges impact profitability.

Commentary

Baxter’s financial performance in 2024 was weak, marked by a net loss and declining profitability margins. Revenue growth was modest, but it was overshadowed by significant goodwill impairments and business optimization charges. The company’s leverage remains high, and its interest coverage ratio is concerning. While the sale of BioPharma Solutions provides some financial flexibility, Baxter needs to improve its operational efficiency and profitability to improve investor confidence.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️