With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

America's Most Innovative Companies

Industries included in the sector are insurance and managed care, medical products and facilities, pharmacy services, and pharmaceutical companies.

Fortune Sector Leaders: Health Care

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 200 companies on this list are transforming industries from the inside out.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

The pharmaceutical and medical equipment company makes products that aid in the treatment of health conditions such as kidney disease and hemophilia.

This year's Fortune 500 marks the 66th running of the list.

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This Deerfield, Ill. company makes devices and other products to treat hemophilia, kidney disease, immune disorders, and other chronic and acute medical conditions.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

World's Most Admired Companies

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Through its subsidiaries, Baxter provides a portfolio of health care products in the U.S. through three segments: medical products and therapies, health care systems and technologies, and pharmaceuticals. Founded in 1931 with headquarters in Deerfield, Ill., it operates in Eastern Europe, the Middle East, Africa, Latin America, Asia, Western Europe, Canada, Japan, Australia, and New Zealand.

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Baxter International (BAX): Company Profile, Stock Price, News, Rankings

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Baxter International

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Good morning, ladies and gentlemen, and welcome to the Baxter International fourth quarter 2025 earnings conference call. Your lines will remain in a listen-only mode until the question and answer segment of today's call. At that time, if you have a question, you will need to press the star, then one keys on your touch-tone phone. If anyone should require assistance during the conference, please press star, then zero on your touch-tone phone. As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Mr. Kevin Moran, Vice President, Investor Relations at Baxter International. Mr. Moran, you may begin.

Good morning, and welcome. Today, we will discuss Baxter's fourth quarter results, along with our financial outlook for the full year 2026. This morning, a press release was issued with our preliminary earnings results and updated outlook. The press release and investor presentation are available on the Investors section of the Baxter website. Joining me today are Andrew Hider, President and Chief Executive Officer, and Joel Grade, Executive Vice President and Chief Financial Officer.

During the call, we will be making forward-looking statements, including comments regarding our financial outlook for the full year 2026 and anticipated timing and impact of our deleveraging efforts, the amount and timing of charges related to recent operating model and cost structure actions, the anticipated impact of various regulatory and operational matters, including ones related to our infusion pump platform and to clinical practice changes following Hurricane Helene, and commentary regarding the global macroeconomic environment, including tariffs and proposed mitigating actions. Forward-looking statements involve risks and uncertainties which could cause our actual results to differ materially from our current expectations. Please refer to today's press release, the forward-looking statement slide at the beginning of our investor presentation, and our SEC filings for more details.

In addition, please note that on today's call, all our comments will be on a non-GAAP basis unless they are specifically called out as GAAP. Non-GAAP financial measures are used to help investors understand Baxter's ongoing business performance. GAAP to non-GAAP reconciliation can be found in the schedules attached to our press release and off our investor presentation. On the call, we will reference operational growth, which excludes the impact of foreign exchange, MSA revenues from Vantive, and the previously announced exit of IV Solutions from China.

We will also reference organic growth, which excludes the impact of foreign exchange, MSA revenues from Vantive, and any impact from future business acquisitions or divestitures. We plan to utilize the organic growth measure going forward. Finally, as a reminder, continuing operations excludes Baxter's Kidney Care business, which is now reported as discontinued operations. With that, I'd like to turn the call over to Andrew.

Thank you, Kevin, and good morning, everyone. Fourth quarter 2025, global sales from continuing operations totaled $3 billion and increased 8% on a reported basis and 3% on an operational basis. Total company adjusted earnings from continuing operations were $0.44 per diluted share. While the top line exceeds our expectations, adjusted EPS fell short. Joel will get into greater detail on the results, but there were a few areas that differed from our expectations we provided in October. On top line, we saw a more modest net impact from Novum IQ Large Volume Pump customer returns, which was favorable to results. While responses have varied, in general, customers are waiting for additional clarity on the nature and timing of the additional corrections that we will look to deploy.

Margins were pressured by both an unfavorable mix of sales as well as some non-recurring items, including inventory adjustments. Finally, we saw a higher tax rate. The results in the quarter are disappointing and underscore the work ahead to improve performance and execute more consistently. I stepped into this role in August with confidence in the potential of the business, given the central role Baxter plays in healthcare, but also with a practical sense of the hurdles before us. As I've continued to visit our sites and engage directly with the team and customers, I've deepened my understanding of both the challenges and opportunities facing Baxter. We're in the early stages of a turnaround and have more work to do to deliver strategically, operationally, and commercially, and recognize that it will take time to implement real long-term solutions.

That said, there's a strong thesis on where we can take this business, and we saw some examples of this in the quarter's results. For example, the Advanced Surgery business capped off a great year with a strong quarter, growing 11%, with contributions both across the portfolio and around the globe. The Healthcare Systems and Technologies segment had another quarter of consistent performance, including a contribution from the recently launched Connex 360 monitor in the Front Line Care division. We're also preparing for the launch of the recently announced Dynamo Series Stretcher. The latest innovation in our portfolio of smart beds, services, and connected care solutions. Innovation will be a critical element to our success, and we recognize the importance of bringing new innovation into the market.

Accordingly, you should expect a heightened focus going forward and continued investment in R&D at or above historical levels. As I said during our last earnings call and reiterated last month, I am focused on three main priorities. These are stabilizing the areas of the business that require increased focus, strengthening our balance sheet, and driving a culture of continuous improvement and efficiency. We are moving with focus and urgency on each of these, and our teams are driving relentlessly to improve execution and performance across the enterprise. It is with this in mind that we have decided to hold off on our Investor Day.

Let me share a few updates on our priorities and the actions we have taken. Stabilize. Just a few weeks ago, we internally announced a new operating model that is designed to simplify our organization, accelerate innovation, and improve performance. Most significantly, we are delayering levels of leadership, including removing the segment management layer and embedding critical functional roles directly in each of our businesses. This will allow each leader to have full P&L responsibility for their business with fully aligned commercial, R&D, manufacturing, medical, and targeted functional support, and importantly, full accountability to the results.

These changes are significant and are designed to reduce complexity, eliminate barriers for decision-making, bring us closer to our customers, and help us to improve our say-do ratio. We've also taken actions within our IV Solutions business to rightsize a support footprint to align to the lower demand environment, which we believe is a new baseline in the market. In Pharma, in addition to market demand softness, supply and backorder challenges have impacted revenue and driven unfavorable product mix. Specific initiatives to address these are in progress.

However, it will take some time to bear fruit. Overall, across the enterprise, we are taking actions to further strengthen our focus on quality and improving on-time delivery, our two customer value creators. Balance sheet. We continue to focus on improving our cash generation and leverage. In line with our expectations, free cash flow generation exceeded $450 million in the quarter, and continuous improvement. As a reminder, operational efficiency is at the center of what we are driving. As you know, a key element of this is our Baxter Growth and Performance System, Baxter GPS, which we rolled out in October to ensure continuous improvement, enterprise efficiency, and a growth and performance mindset are integrated into our day-to-day work.

We recently held our first annual President's Kaizen, where I was impressed by the resolve each of our leaders demonstrated in driving change for the better, with a focus on 10 events that will drive cross-business impact. Through focused, week-long sprints, teams tackled critical opportunities aligned to our 8 value creators. The work underway is helping us reduce complexity, better anticipate customer needs, accelerate innovation, commercialize faster, and deliver value sooner. We are focused on improving every aspect of our operations, and we will be consistently measuring our performance to deliver just that.

Importantly, this is not a one-off event. It's how we're building a continuous improvement culture where everyone is empowered to make things better every day. Before I turn it over to Joel, I just wanted to reiterate the key steps we're taking. We have streamlined the organization for greater accountability. We have launched GPS to drive continuous improvement, and we have heightened our focus on innovation to better meet customer needs, all to drive improved performance and long-term shareholder value creation. Now I will turn it over to Joel. Joel, over to you.

Thanks, Andrew, and good morning, everyone. Fourth quarter 2025 global sales from continuing operations totaled $3 billion and increased 8% on a reported basis and 3% on an operational basis. Performance in the quarter reflects growth across all segments. On the bottom line, total company-adjusted earnings from continuing operations were $0.44 per share. Results in the quarter reflect unfavorable product and geographic mix, some non-recurring items, including inventory adjustments and a higher tax rate, partially offset by the positive impact from pricing in select segments. Now I'll walk through our results by reportable segment. Commentary regarding sales growth in 2025 will be on an operational basis. Sales in our Medical Products and Therapies segment, or MPT, were $1.4 billion and increased 4% in the quarter.

Performance in the quarter reflects growth in Infusion Therapies and Technologies, or ITT, as well as continued strength in Advanced Surgery products. Within MPT, fourth quarter sales from our ITT division totaled $1.1 billion and grew 1%. Performance in the quarter was driven by growth in IV solutions, which benefited from a favorable comparison to the prior year period, partially offset by lower infusion pump sales due to the previously discussed shipment and installation hold of Novum IQ LVP. Within IV Solutions, underlying U.S. demand remained below historical levels.

As previously discussed, fluid conservation practices embedded with clinical practice changes in the market following Hurricane Helene remained and continued to weigh on volumes. In infusion systems, results in the quarter reflected the net impact of lost sales due to the ongoing shipment and installation hold of the Novum IQ LVP, customer returns, and transitions to Spectrum. Relative to our prior guidance, this net impact was more modest in the quarter. While customer responses have varied, in general, many are understandably waiting for additional clarity on the nature and timing of additional corrections that we will look to deploy and of the release of the ship and installation hold. Sales of Advanced Surgery totaled $328 million and grew an impressive 11%. Results in the quarter reflect continued solid demand for our portfolio of hemostats and sealants, strong commercial execution across regions, and steady procedure volumes.

MPT's adjusted operating margin totaled 15.4% for the quarter, decreasing 110 basis points over the prior year period, and reflects increased manufacturing and supply costs, unfavorable product mix, inventory adjustments, and higher costs related to tariffs. These factors were partially offset by positive pricing in the quarter. Kidney Care TSA income positively contributed as well. In Healthcare Systems and Technologies, or HST, sales in the quarter totaled $827 million, increasing 4%. Within HST, sales of our Care and Connectivity Solutions, or CCS division, were $537 million and grew 4% globally. Performance in the quarter was driven by double-digit growth in our Surgical Solutions business and continued momentum across our Patient Support Systems portfolio.

Total U.S. capital orders for CCS increased nearly 30% compared to the prior year, driven by broad-based strength across Patient Support Systems, Care Communications, and Surgical Solutions, and our order book remains strong. To date, we have not observed a slowdown in U.S. hospital capital spending. However, given the broader macroeconomic uncertainty, we continue to closely monitor the situation.

Front Line Care sales in the quarter were $290 million, an increase of 3%. Performance in the quarter reflects increased demand in our cardiology and patient monitoring portfolios, which includes our recent launch of Connex 360. HST adjusted operating margin totaled 15.2 for the quarter, decreasing 330 basis points compared to the prior year. These results reflect unfavorable product and geographic mix, increased corporate allocation expenses, and higher costs related to tariffs. TSA income partially offset these increased expenses. Moving on to our Pharmaceuticals segment. Sales in the quarter totaled $668 million, increasing 2%. Within Pharmaceuticals, sales of our Injectables and Anesthesia division were $352 million and declined 9%.

Performance in the quarter reflects a decline in our injectables portfolio, driven by a difficult comparison to the prior year period, as well as softness in certain pre-mix products, largely consistent to the dynamics discussed last quarter related to IV infusion protocols and increased use of IV push in select hospital settings. Our anesthesia portfolio declined high single digits, reflecting softer demand for select inhaled anesthesia products. Drug Compounding grew 18% and reflects continued strong demand for our services outside the U.S. Pharmaceuticals adjusted operating margin totaled 5.8 for the quarter. These results reflect increased manufacturing and supply costs, an unfavorable product mix, price erosion, inventory adjustments, and increased corporate allocation expenses following the sale of Kidney Care.

These expenses were partially offset by Kidney Care TSA income. Finally, other sales, which represent sales not allocated to a segment and primarily include sales of products and services provided directly through certain manufacturing facilities, were $7 million in the quarter. MSA revenue from Vantive totaled $84 million. As a reminder, these sales are included in our reported growth. However, they are not reflected in our operational growth for the quarter. Before moving on to the rest of the P&L, an important reminder on our continuing operations reporting. Following the sale of our Kidney Care business, certain corporate costs that did not convey with the business are now allocated across our segments in both cost of goods sold and SG&A, along with income from the TSA, which is currently recognized within other operating income.

In addition, as previously discussed, we reclassified certain functional expenses from SG&A to cost of goods sold beginning earlier this year. These costs support manufacturing and are now treated as indirect expenses, subject to inventory capitalization and recognized in cost of sales when sold. Fourth quarter adjusted gross margins from continuing operations were 35.5%, a decrease of 900 basis points compared to the prior year. Fourth quarter adjusted SG&A from continuing operations totaled $637 million or 21.4% of sales, a decrease of 330 basis points from the prior year period. Results reflect disciplined expense management and the benefit from the reclassification of certain functional costs.

Adjusted R&D spending from continuing operations in the quarter totaled $116 million, or 3.9% of sales, which came in lower than our expectations. This reflects the reclassification of certain product support and sustaining activities into cost of sales, and therefore does not reflect our anticipated level of R&D spend going forward. TSA income and other reimbursements totaled $50 million in the quarter and came in line with our expectations. As previously discussed, the associated expenses related to this income are reflected in other lines of the P&L, including cost of goods sold and SG&A. Altogether, these factors resulted in an adjusted operating margin of 11.8% on a continuing operations basis, a decrease of 340 basis points compared to the prior year period.

Results reflect unfavorable product mix and non-recurring items, including inventory adjustments, partially offset by positive pricing in select segments and the benefits of TSA income. Net interest expense from continuing operations totaled $58 million in the quarter, a decrease of $32 million versus the prior year period, reflecting lower interest expense following the paydown of existing debt with proceeds from the Vantive sale. Adjusted other non-operating income totaled $15 million, driven primarily by amortization of pension benefits compared to the prior period. The continuing operations adjusted tax rate for the quarter was 27.2%, driven primarily by mix of earnings across jurisdictions. In total, adjusted earnings from continuing operations were $0.44 per share for the quarter. Before turning to our 2026 outlook, I want to comment on cash flow and liquidity.

Fourth quarter free cash flow was $456 million, bringing full-year free cash flow to $438 million. Performance in the quarter reflects improved cash flow generation and seasonality, including progress across select areas of working capital, as well as continued focus on execution as we close out the year. We continue to focus on strengthening cash flow generation and maintaining discipline around working capital, foundational elements of our financial strategy. Improving the balance sheet continues to be a key area of emphasis, and we intend to deploy cash towards reducing leverage in line with our capital allocation framework. Now, our outlook for the full year of 2026, including some key assumptions underpinning the guidance. For full year 2026, we expect total sales growth to be flat to 1% growth on a reported basis.

This reflects current foreign exchange rates, which are expected to contribute approximately 100 basis points to top-line growth through the year. In addition, reported sales are expected to include a headwind of approximately $25 million from MSA revenues from Vantive. This represents approximately 30 basis points of impact on reported growth. Excluding the impact of foreign exchange and MSA revenues, we expect organic sales growth of approximately flat for 2026. As it relates to the segments, in MPT, we expect full-year organic sales to be flat to slightly up. This reflects the continued uncertainty around the Novum situation, including the potential impact from various customer responses.

It also reflects the assumption that the ship and installation hold will remain in place for the full year. And as previously discussed, we believe that the market is at a new baseline in our IV solutions business. In HST, we expect full-year organic sales to grow low single digits. This reflects expected contributions from both the Care and Connectivity Solutions and Front Line Care divisions. In Pharmaceuticals, we expect full-year organic sales to be approximately flat. This reflects continued pressure in Injectables and Anesthesia related to softer market demand, supply challenges, and ongoing IV push utilization trends that have been discussed in prior quarters.

Turning to our outlook for other P&L line items, beginning with tariffs, we estimate a full-year impact net of mitigating actions to be approximately $80 million, which is a year-over-year headwind of approximately $40 million. TSA income and other reimbursements are expected to range between $130 billion and $140 billion. We expect full-year adjusted operating margin from continuing operations to range between 13% and 14%.

This primarily reflects lower gross margins, driven by unfavorable product mix, including the impact of lower manufacturing volumes and reduced contribution from pricing. These pressures are expected to be partially offset by improvements in SG&A, including the recent restructuring actions. We expect our non-operating expenses, which include net interest expense and other income and expense, to total between $280 million-$300 million. This reflects higher interest expense from the recently completed debt-neutral transactions and lower contribution from other income. On a continuing operations basis, we anticipate a full-year tax rate to range between 18.5%-19.5%. We expect our diluted share count to average approximately 518 million shares for the year.

Based on all these factors, we now anticipate full-year adjusted earnings on a continuing operations basis of $1.85-$2.05 per diluted share. While we will not be providing explicit quarterly guidance, I want to offer some perspectives on the expected gains to results over the course of the year. Overall, we expect the first quarter to be the most challenging, with improving performance thereafter. Specifically, the ITT Division has an unfavorable year-over-year comparison in Q1 due to the one-time distributor build in the prior year. Additionally, ITT results in the first half are expected to reflect absorption headwinds from the rollout of higher-cost inventory produced in the second half of 2025. We also expect to see a second-half benefit from the recently taken actions to right-size our cost structure.

Therefore, we expect ITT performance to improve throughout the year, assuming relatively stable demand. Within HST, new product launches are expected to contribute to stronger growth in the second half of the year compared to the first half, including Connex 360 and Dynamo. In Pharmaceuticals, we expect the previously mentioned headwinds to continue in the first half of the year. As we move into the back half of the year, we anticipate a more favorable comparison and improved performance. Finally, as a reminder, the first half of the prior year saw benefits to operating margins related to the timing of certain functional costs being reclassified in the cost of goods sold. Collectively, these factors support our expectation that organic sales growth, operating margin, and adjusted earnings per share will be back-half weighted.

With respect to free cash flow, similar to 2025, we expect it to be back-half weighted due to our normal seasonality, expected gains of earnings, as well as recent cost structure actions. With that, we can now open up the call for Q&A.

Thank you. We will now begin the question-and-answer session. If you have a question, please press the star, then one keys on your touch-tone phone. If you wish to remove yourself from the queue, again, press star then one. If you are using a speakerphone, please lift the handset to ask your question. So that we may be respectful of everyone's time, please limit your comments to one question with one follow-up question if necessary. We appreciate everyone's patience and would like to provide as many of you as possible the opportunity to ask a question. We will pause for a moment while the list is being compiled.

I would like to remind participants that this call is being recorded, and a digital replay will be available on the Baxter International website for 60 days at www.baxter.com. Our first question comes from David Roman of Goldman Sachs. Your question, please.

Thank you. Good morning, everybody. I wanted to start with one strategic question that had one, financial follow-up. May, maybe firstly for you, Andrew, as you just think about the number of moving parts you're trying to navigate here: strategic review, catching up on innovation, deleveraging, what are you doing to ensure sustainability of the business as it relates to the competitive dynamic? And, and how are you gaining sufficient visibility to drive the forecasting process?

Yeah. So good morning, David. Let me start by just walking through. Part of my standard work as a CEO is to visit customers on an ongoing basis. And I'll tell you that the message is loud and clear that we are essential to not only supporting, but to enabling their ability to bring high level of patient care, and we're an essential and trusted brand through that. As a reminder, we touch over 350 million patients per year. All that said, we need to get better, and we are not satisfied with our current performance. And you've heard me consistently talk about not only near term, and to walk through, it starts with stabilizing the business, and I've outlined that in my prepared remarks.

To get more specific, we are driving the accountability at the lowest levels in the organization. Additionally, it's about strengthening our balance sheet, and lastly, our focus on, on continuous improvement and really enabling that such that we focus on the customer and streamline the organization to be able to execute at the pace we expect. We're early in our journey, but we're making progress. Now, to date, we've aligned around streamlining the organization, we've launched GPS, and we've heightened our focus on innovation and back to listening to our customers and launching products. It starts with our Connex 360 that I talked about, and then additionally, we launched earlier in the year or talked about launching earlier in the year, the Dynamo Stretcher platform. So while we're making progress, we have a lot more work to do.

Yeah, David, and it's Joel. I'll take the forecasting piece of this thing, and clearly, improving our forecasting accuracy is a major priority, and we're attacking that in a very structured way through Baxter GPS. And yeah, I look, I certainly understand and appreciate the frustration and the volatility of our historical results, and we're gonna... We have and will continue to be transparent about the challenges we're facing and the actions we're taking to address those challenges, as well as obviously, the assumptions underpinning the guidance. But GPS gives us a more disciplined operating rhythm, a clear accountability, and a lot more continued visibility to the drivers of our performance.

So as you've heard us talk about focusing on demand planning, we also focus, you know, really around our cross-functional alignment between our commercial teams, our operational teams, our finance teams, and just building a more rigorous, daily, weekly, operating mechanisms that really surface issues earlier and allow us to course correct, more quickly. So, look, all this is designed to reduce volatility, you know, improve the predictability of our results over time, and as Andrew likes to say, drive a really consistent say-do ratio as an organization. So we know we have work to do, and, we're attacking it head-on.

And then maybe just as a follow-up here, can you just remind us on where you are and the progress you're making on reducing the G&A and support costs that today are getting reimbursed by Vantive via the TSA, and how we should think about the runoff of the TSA over the course of the year and into next year and your retained costs? Like, can that be a one-for-one offset? And maybe just help us think through the nature of the operating dynamics there.

Yeah, sure. So a couple of things there. Number one, you know, for 2025, one of the things we've said is that we had, including cost takeout and TSA income, we had about a 40 basis points, I'll say, remaining impact on the year, we are on track for that, and so I think that's been successful that way. Yeah, we continue to make good progress on our cost takeout, and, you know, you've heard Andrew talk about the streamlining the operating model. That's a continual work stream on this. We, we've continued to streamline our operations to meet demand. We've, we've talked about that as well from a volume perspective. Then again, this work is done in, in relation to our stranded costs as well.

And so, you know, our TSAs, you know, do start to tail off some in 2026. Obviously, they really go into 2027. As we've said, we are committed to eliminating our stranded costs by the end of 2027, and we're remaining on track to do that. So I, again, feel good about that progress, and again, a lot of this work that you're hearing us talk about today is on targeting on that goal. So hopefully that helps.

Robbie Marcus of JPMorgan is on the line with a question. Please state your question.

Yeah, great. Thanks for taking the questions, and good morning. Two for me. Joel, maybe just to follow up on David's question, especially as the TSAs roll off, and I know it's, it's early here, but do you think you'll be able to grow earnings next year as the TSAs roll off, what you said today?

Just to be really clear, next year, meaning 2027 or 2026?

2027. Look, we're certainly not forecasting or issuing guidance on that today. Do I anticipate growth? Yes, but I don't know that we... As we've talked about, Robbie, the TSA typically are 24 months. You know, our deal was closed on January 31st of 2025. So the majority, I'll say, the TSAs fall off in the early part of 2027. And again, we do expect to continue to work through that through the year and again, finish that off by the end of 2027. So, but again, we're not giving specific guidance on growth at this point.

Great. Maybe a follow-up question. You know, the gross margins obviously came in well below where the street was and operating margin as well. I was hoping you could just bridge us from the fourth quarter 2025 to the 2026 guide. How much shifted from below gross margin into cost of goods? And if you could also help put a finer point on first quarter, so we could get a better sense of cadence through the year. Thanks.

Sure. So, maybe I'll start again. You know, again, we haven't provided specific numerical guidance, but I'd certainly reiterate that I anticipate Q1 is going to be our most challenging quarter. There's a number of reasons for that, you know, Robbie. I mean, number one, number one, I'd call just our normal seasonality. You know, obviously Q4 tends to be a lot larger quarter than Q1. So our margin pass-through, again, there is some typical detriment there. Now, there's also a prior year comparison, remember, at ITT, and while that's not a sequential driver, you know, it does mess a little bit with the seasonality we talked about because our comparison in Q1 year-over-year with the one-time distributor build in 2025 is a little bit wonky.

So, you know, at the time, we sized that as about 150 basis points to total company sales, so call that a $40 million-$50 million impact, and that'll be a headwind in year-to-year growth in Q1. There's also continued uncertainty on Novum returns. You know, one of the things we talked about in the last quarter was sort of an uncertainty around customer behavior. That uncertainty, I'd say, still exists to a degree, and again, really carries into this year. And so, our customers are a bit of a wait-and-see mode still, and therefore, as we referenced last quarter, there's an ongoing risk for customer responses there. Then, again, this is all top line, but Drug Compounding in Q4 18% growth, probably not necessarily sustainable from that number.

So obviously, expecting that to be lower in Q1. And then from a margin perspective, again, I already referenced some of the lower volume. There's also what I'll call absorption headwinds. So again, in 2025, we had some of these higher manufacturing costs, and that ended up in our inventory capitalization. That is then rolling out as we sell those products, obviously in the first half of the year, really, but also certainly in Q1. And so that's an incremental headwind. The margins, we haven't given specific guidance around the number on that. And then the other thing is we continue to expect bottled margins to remain pressured due to softness in Injectables and Anesthesia, and then really just the overall mix of the business.

So, I guess finally, what I'd say from an EPS perspective, Robbie, you know, the incremental interest expense that kicks in in Q1, and so that's certainly something to expect there. So, that's... So again, hopefully, that helps with some of the guidance there.

Vijay Kumar of Evercore ISI is on the line with a question. Please state your question.

Hey, guys. Thank you for taking my question. Andrew, maybe my first one for you is, you mentioned, you know, how you resolve Novum, right? But your guidance assumes, Novum ship hold remains in place for the full year. Have you communicated this to customers? Like, what have you told customers, right? I understand the guidance assumption, but I'm curious, are customers willing to wait for a year, for Novum to resolve?

Yeah. Good morning, Vijay. So let me walk this through a little bit here. So first and foremost, customers can and are continuing to use the device according to existing instructions and mitigating actions. We've continued to make progress on our Novum solution and the corrections, and we're staying close. And as we go through testing, as we go through really identifying the longer-term solution set, we will update. As a reminder, we have a strong pump portfolio. We have our Spectrum LVP that we utilize through this transition, and I even walked through earlier in the year, we've launched Spectrum with the IQX platform.

It enables us to really not only work with our customers, but to have a total pump portfolio with Spectrum being our LVP and Novum being our syringe and Novum being a newer product set that we've launched in the recent history. So while we're going through our Novum updates, we have a strong platform that we can bring to market. And as a reminder, we're also launching early Q2 PureView on the IQX platform. And PureView is designed to really support our customers and their ability to identify and work on fluid processing. So we're continuing to innovate, continuing to build on, and given our pump platform, we are in a position to support our customers through this.

...Understood. And maybe my second one for you, Andrew, you mentioned the operating model change. Curious on, on, you know, what has changed from prior model rate? How is this model better, and, and what's the impact of, or implication of free cash flow? I know you mentioned, P&L responsibility. Is free cash flow going to improve from, fiscal 2025?

Yeah. So, I guess I'll take the first part, and then I'll let Joel walk through a little bit around the cash process. Look, just a few weeks ago, we internally announced the new operating model, and it's designed around simplifying our organization, accelerating innovation, and improving performance. And we are putting the accountability at the lower levels in the organization. And I would say most significantly, or one of the areas is delayering at the top level, removing the segment management and embedding critical functional roles directly into the business.

And so this allows us to really further eliminate the barriers for decision-making. And it's streamlining to listening to our customers and ultimately helping us improve our Say-Do Ratio and execute on a more consistent basis. This approach is really moving down that decentralizing and streamlining the organization with blocked out accountability.

Yeah, Vijay, and then I'll take, again, the cash piece of this. Certainly, as you've heard Andrew talk about regularly and, and myself as well, is improving our balance sheet, cash generation continues to be a top priority for the company. We do expect in 2026 that free cash flow will improve versus 2025, driven primarily by, by stronger working capital performance and, as well, obviously, we, you know, don't expect to repeat some of the one-time hits that happened in 2025, specifically the, expenses for the hurricane. You know, from a free cash flow perspective, we do also, you know, similar to 2025, we do expect it to be somewhat back half related.

That is, that includes a charge in Q1 related to recent operating model and cost structure actions, as well as some of the seasonality that we typically show. But, we also do expect, again, we've talked about from a P&L standpoint, our earnings that tend to be skewed towards the second half of the year due to some of the structural impacts that have, you know, recognized and we expect to recognize in H2. Again, as well as some of the impacts, you know, from the manufacturing side of our business in terms of adjusting to better volumes. I feel confident in that. Why? Because again, some of the impacts are driven by actions that are in flight.

So again, the structural costs work in flight, the work around adjusting our manufacturing operations for better impact, you know, along those volumes are in flight. And then the biggest thing in year-over-year drivers I mentioned really around working capital, inventory management, improved receivable collection processes, and tighter control over payables process, including, I'll say, commercial terms. So but GPS is playing a role in this as well, giving us a more consistent operating cadence, better visibility to reduce volatility, and that overall strength in our cash conversion. So again, we do expect cash flow to continue to move in the right direction as we execute through 2026. Again, we saw some of that already in the fourth quarter of 2025.

Larry Biegelsen of Wells Fargo is on the line with a question. Please state your question.

Good morning. Thanks for taking the question. Two for me, one on the gross margin, one on Pharma. Joel, could you please give us a little bit more color on, you know, the Q4 gross margin? How much of the year-over-year decline was due to, you know, tariffs, mix, reclassifications, and the one-time items you called out? And how much lower do you expect the gross margin to be in 2026 versus 2025? I assume it's more than, you know, the decline we see in the operating margin guidance. I had one follow-up.

Yeah. Thanks, Larry. Appreciate the question. Yeah. So from a, again, I'll call gross margin, and again, overall operating margin standpoint, certainly a few factors played into this. I mean, the unfavorable mix of sales. So again, with business mix, I'll say a geographic mix, a product mix, that certainly was a key element to this. We also had, you know, as we referred to earlier, some higher manufacturing and supply costs, really for a couple different reasons. One, obviously, some of the challenges we had aligning, again, our, their labor to volumes, but also some of the impacts that Andrew mentioned related to some of the challenges that we've seen in Pharma. Those factored into this as well.

The non-recurring items, again, I would classify that as it's around $40 million of the impact that were related to gross and operating margins in the quarter. So they'll certainly those are things to contemplate and as part of that. So I, I would say that's really the main drivers there. Again, as I indicated, about $40 million of that, non-recurring.

Joel, 2026 versus 2025 gross margin, I didn't hear that.

Yeah. You know, again, we haven't given specific guidance on that. I guess what I would say a little bit to the commentary that I had as it relates to sort of the Q4 to Q1, you know, I'd say, you know, there's some of these impacts that we expect to continue into 2026. And I think about a little bit of this as a H1, H2 kind of part of the year. In other words, this is going to continue to improve over the second half of the year. But there's really two factors I'd say in H1 that I would consider as part of it. One is I'll call mathematical, and then one is more just kind of actions that are driving outcomes.

So the mathematical piece, again, we do have some normal seasonality in our company between H1 and H2 from a pure volume perspective. That certainly we'd expect to continue. And then, you know, our earnings, you know, gains reflect a more challenging first half, with the improvement in the second half. ITT absorption headwinds, again, this is something that, you know, in the first half, you know, we had higher costs of inventory than we capitalized. And, that obviously we saw benefits there that's going to then roll into the first half of this year. So that's, essentially a headwind in the first half of 2026. So those are the mathematical pieces, as well as tariffs. Remember, we didn't have tariffs in the first half of last year.

Then as it relates to the actions driving outcomes, you know, there's a couple elements to this. One is the structural cost takeout that we've talked about. The impact of that is obviously, again, those, those actions are in flight. Again, you know, confident in the work that we're doing, but the outcomes of that are primarily going to be impacted in the second half of the year. And then, in terms of aligning our manufacturing labor, you know, with, with our volumes and our production costs, again, that impact will start to show itself in the second half of the year. Because, again, we're still, I would say, taking the hit, if you will, from the capital as we sell those products in the first half of the year.

Yeah, that's helpful. And Andrew, thanks for giving us the P&Ls by segment. You know, Pharma has an operating margin of, of 9%. It was even lower in Q4. My guess is Compounding, which is your fastest-growing business, doesn't make a lot of money. What, what are you doing to improve the margins in this business? And, you know, why, why does it make sense to keep a, a low-margin business like Compounding that seems to hurt your kind of mix every quarter? Thanks.

Yeah, and I'll just walk through kind of the fundamentals of Pharma and really outline. So overall, we like the fundamentals of this business. And just a couple items. We've also taken this part of the organization, and we've combined it with our ITT business. And the reason being is it's synergistic with that organization, and it's common customers, common call points, and there's an opportunity to improve the business, and we have, and we're continuing to take actions to do so. Additionally, there's been some areas that have been in our control that we've been challenged with.

Through GPS and through this identification with driving the accountability at the lowest levels, we've taken critical actions around aligning to improve, and one of them is around operational execution. Not to get into too much specifics, but we saw one of our facilities really hindered by the ability to drive output. We took an action team around this. They've already improved. They're continuing to improve. We're going to see that performance through the... you know, improve through the first half of the year. But more importantly, it's around how do we not get back into this situation? How do we build this and have this being sustained performance? The role GPS plays in that is around identification and critical action.

The second piece within our control is we had a supplier challenge, and to be quite candid, it was an area that we identified, we are working through. It is going to take us a part of the year to get through this, and we're identifying how we have alternatives to continue to support the product. We are continuing to ship. That said, we are looking to identify for long-term solutions. So, you know, to answer your question head-on, we like the fundamentals of the business. We've got some work to do here, and we need to continue to align around the value creation we have for our customers.

And Larry, two other things I would maybe just add to that. I think number one is in the, you know, some of the margin challenges that we saw in Q4, certainly, as Andrew said, that, you know, starts to improve over the second part of the year, but we still anticipate that being an impact in Q1. And then the second piece of this, just the one reminder as it relates to the Compounding business. I mean, yes, certainly that mix impact has been, is a margin impactor as well in terms of the relative level of growth in Compounding to our injectable anesthesia.

The one thing about that business, it is our fastest cash cycle in the business, so that is one area that just I would—as a reminder, that is a benefit from that particular business.

Travis Steed of Bank of America is on the line with a question. Please state your question.

Thanks, Joel. Still a little confused on what to put in the model for Q1 and to understand kind of the slope of the recovery in 2026. And is revenue kind of down low single digits, down mid-single digits? Are gross margins, op margins, flat down sequentially? You know, what % of earnings should fall in Q1 versus kind of the second half of the year? Just any more details on how to model the Q1?

Yeah. Thanks for the question. So again, we haven't specifically given numerical guidance on the quarters. Again, this, the thing I would just continue to reiterate is the fact that, again, there's a number of these key elements that are impacting Q1. Again, even, you know, I'd say as we, you know, even contemplated that relative to Q4. Again, I'll just run through a couple of them again. And again, there's a volume and seasonality impact that occurs. There's the continued elements of uncertainty around our Novum customer behavior, around our Novum LVP returns. Again, there's a likely, as I just referenced on the last, continued challenges from a Pharma perspective, as it relates to our overall margin.

And again, the headwinds from an absorption standpoint, again, we capitalized into our inventory costs, some of the higher costs that we experienced in 2025. As we head into 2026, and we sell, again, those are going into our COGS. And so as we sell those products, those are essentially selling higher-priced inventory as we head into the first quarter and H2 in general. So those are some of the main issues that are driving that, and again, on an EPS level, interest expense kicking in. I think that's those are really the main key drivers I would think about, as to why our first half and specifically first quarter remains particularly challenging.

Okay. We'll hopefully get more offline. Two little kind of nitpicky questions. One, just kind of curious if you're assuming share gains or share losses in infusion pumps this year, and OUS Care and Connectivity Solutions was up $50 million sequentially. Was there anything kind of one time in that line item?

Yeah. So I guess I'll start with the first question here. Look, we have good opportunity as we go into the year. And, you know, as a reminder, Spectrum is, it's a workhorse in the space. And not only is it a workhorse, we continue to innovate on the platform, and now that it speaks with Novum syringe, we're continuing to be confident in our ability to bring high value to the market we serve. Can you repeat the second part of your question? I'm sorry.

Yeah. International Care and Connectivity Solutions was up $50 million sequentially. I didn't know if there was anything one time in there. It was just, it looked like a big growth rate in the international business.

Yeah, I mean, I would just say in general, that business has been performing well. I don't know that there's anything one time. I would say in general, in the overall CCS business, again, we've got a strong order book. We've talked about that. We've had some competitive wins from a customer standpoint, and capital spend in general remains really, you know, kind of strong, strong across our geographies. So, I don't know if there's anything unusual or one time there, just that that business has continued continued strong business, and they've continued to improve outside the U.S., which was somewhat of a headwind last year.

Danielle Antalffy of UBS is on the line with a question. Please state your question.

Hey, good morning, guys. Thank you so much for taking the question. Andrew, I appreciate it's not been terribly long, but I guess I'm just curious about looking at the Baxter portfolio in its totality, sort of how you feel about the state of the portfolio today, appreciating, you know, you're not going to be doing probably M&A anytime soon. But, A, sort of where you see the most exciting opportunities with the current portfolio that might be underappreciated by investors, and then, B, where you think there's opportunity to sort of ramp up the product portfolio. Thanks so much.

You bet. If I miss something, Danielle, certainly feel free to jump in. I'll take this as you outlined in the question. So look, Baxter's fundamental, and it's fundamental to the healthcare system. As I mentioned earlier in the call, it's a trusted partner. We have market leadership across multiple product categories. We have a resilient portfolio and deep customer relationships that really give us a competitive advantage. Now, as we go forward, innovation will be a critical element to our success.

You know, as we look at innovation as an enabler, it's really extremely important as we bring new innovation to the market, and not only from listening to our customers and identifying the pain points to solution, but also just that staying in front of our total portfolio of product set. So there's an opportunity to not only improve our performance, but GPS becomes the foundational foundation for how we really drive disciplined not only operating rhythm, but also clear accountability and clear enablement to listen to our customers, streamline our ability to bring strong capability to the market, and really have real-time visibility to bring innovation, to solve issues, and to solve challenges that our customers face.

So, like the fundamentals of where we sit, certainly areas we need to continue to challenge on. And, you know, there are some areas internationally that we're looking at. We do have smaller exits that we're looking at in 2026, as we look at our total portfolio. And as far as areas where, you know, I just called it out in the call, we're pleased with our performance in many of our businesses, but more specifically in how we bring our solution from not only our Advanced Surgery business, but the capability we have in that space and how customers-...

We look to Baxter to support and have high value when they're treating and working with patients. But we have many of those. MPT has areas we're looking at, as well as HST and as well as Pharma. So, more to come, and, you know, if I could just characterize how we think about innovation for the future, it's a base hit discussion, not walk-off grand slam. It's about that constant drive to launch products, to launch solutions that really enable our customers to bring higher level of care at a more efficient pace. And last, on capital allocation, you know, it is a critical element.

We talked as direct on capital allocation as we do around our market strategy, and I've outlined, it starts with delevering our balance sheet, and we've taken critical actions around that. When we look at the other levers, reinvesting in the business, and I walked through, we're gonna be at or above on our innovation reinvestment, expecting new product launches, expecting areas to drive R&D, not just sustainment, but also as we get into future and we delever, identifying targets that can add high value from an M&A perspective. And we have a strong funnel, but we need to delever first. So hopefully I answered your question.

We have time for one more question. Joanne Wuensch of Citi is on the line with a question. Please state your question.

Baxter International (BAX) Q4 2025 Earnings Call Transcript

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