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.

F500-2020-282-Baxter-International

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

baxter international

Good morning, ladies and gentlemen, and welcome to Baxter International's second quarter 2026 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 *1 key 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'll discuss Baxter's second quarter results, along with our updated 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 Anita Zielinski, Interim Chief Financial Officer, Chief Accounting Officer, and Controller. During the call, we will be making forward-looking statements, including comments regarding our updated financial outlook for the full year 2026 and the anticipated drivers of the third quarter and second half 2026 performance, the anticipated impact of various regulatory and operational matters, including ones related to our infusion pump platform and ongoing supply chain challenges, and commentary regarding the global macroeconomic environment, including tariff impacts and the broader inflationary pressures.

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 detail. In addition, please note that on today's call, all our comments will be on a non-GAAP basis unless they're specifically called out as GAAP. Non-GAAP financial measures are used to help investors understand Baxter's ongoing business performance. GAAP to non-GAAP reconciliations can be found in the schedules attached to our press release and our investor presentation. On the call, we will reference organic growth, which excludes the impact of foreign exchange, MSA revenues from Vantive, and the impacts associated with business acquisitions or divestitures.

Unless otherwise noted, all financial results on today's call reflect continuing operations and exclude Baxter's former kidney care business, which is reported as discontinued operations. Finally, Andrew, Anita, and I will take questions following the prepared remarks. We kindly ask that you limit yourself to one question and one brief follow-up so that we can give as many people in the queue an opportunity. With that, I'd like to turn the call over to Andrew.

Thank you, Kevin, and good morning, everyone. I am encouraged by our second quarter financial results that came in ahead of expectations, demonstrating continued steady progress on our strategic priorities and improved execution across the business. In the quarter, broad-based operating performance drove organic revenue growth of 5%. Additionally, results reflect a tariff refund that was not contemplated in our original guidance. Free cash flow generation was again positive, which reflects our focus on strengthening financial flexibility. We are now in a stronger position to deliver on the financial goals we set at the start of the year. I am pleased with the progress we are making, but I'm far from satisfied. We are still early in our turnaround and have more work ahead of us. We are laser-focused on executing in the second half of the year, as well as driving improved performance and long-term shareholder value creation.

With that, let me provide some highlights of our performance in the quarter. Second quarter global sales totaled approximately $3 billion, representing an increase of 5% on both a reported and organic basis. We saw growth across the portfolio, led by Advanced Surgery and drug compounding. Every segment and division contributed, with sales increasing in both the U.S. and internationally. Adjusted earnings for the quarter were $0.56 per diluted share versus $0.59 in the prior year period. As expected, this reflects the known mechanical headwinds that we have previously discussed and that Anita will cover in more detail. It also includes a tariff refund of $75 million that was not assumed in our previous guidance and contributed approximately $0.11 per diluted share. Importantly, absent this benefit, margins and earnings still exceeded our expectations due to the strength of the operating performance.

With respect to Novum IQ LVP, we have identified corrections to address the field actions and are in the early stages of verification testing. We continue to work closely with the regulatory authorities and support our current Novum LVP customers who continue to operate with the available mitigations, while also continuing to serve the market with our broader pump portfolio. Overall, we saw steady demand across our end markets during the quarter. Growth remains strong in Advanced Surgery, and we have a healthy order book in our Care & Connectivity Solutions business. Of course, we continue to closely monitor the broader environment, including macroeconomic uncertainty and volatility in oil prices. Looking ahead, we are raising our outlook for full-year organic sales growth to reflect the strong Q2 performance and our confidence in the back half of the year.

We are also increasing our outlook for adjusted EPS to reflect the tariff refund. We continue to expect margins to expand in the second half of the year, driven by higher volumes consistent with typical seasonality, benefits from our cost structure actions, and the roll-through of higher cost inventory. Shifting now to our turnaround efforts. We continue to show progress on our three strategic priorities. The first of those priorities is stabilizing the business, particularly in areas that require increased focus. For example, we continue to focus on improving supply reliability across portions of our pharmaceutical portfolio, recognizing that challenges remain, including with certain products supplied by a contract manufacturer. Additionally, we had strong execution against customer demand in Care & Connectivity Solutions. Overall, we're seeing encouraging progress and are focused on building greater consistency across the portfolio.

As part of our efforts to stabilize and improve performance, earlier this year, we brought together our pharmaceuticals and infusion therapies and technologies businesses under a single leader. Our new reporting structure reflects that change, with the combined business now reported as Infusion Therapies & Platforms, or ITP, within the Medical Products & Therapies segment. We believe the combination will support stronger coordination, execution, and innovation across businesses that share common customers, capabilities, and workflows in the pharmacy space. Moving on to our second strategic priority, which is strengthening the balance sheet. During the quarter, we again saw positive free cash flow generation, bringing our year-to-date total to $257 million. This is another positive step forward and reflects our continued focus on improving working capital and strengthening cash flow generation across the organization.

There is still significant work ahead, but the strides we have made in the first half give us increased confidence in our ability to achieve our net leverage target of approximately 3X by the end of the year. Achieving a stronger and more flexible balance sheet unlocks more optionality to drive shareholder value, including strategic tuck-in M&A that enhances our customer offerings and growth profile, as well as the option to return capital through share repurchases. Turning to our third priority, driving continuous improvement. Now, in its third quarter since deployment, the Baxter Growth and Performance System, or Baxter GPS, has taken hold in the company culture and is becoming increasingly embedded in how each division operates. Through the first half of the year, we have completed over 400 continuous improvement events held across Baxter. We have nearly 200 in flight and another 400 planned in the pipeline.

While no single event will define our future, small improvements over time should lead to big improvements. Cross-functional teams are using Baxter GPS tools to identify execution risks earlier and implement mitigating actions sooner. Continuous improvement activity is supporting working capital, commercial, manufacturing, and R&D priorities, with early examples of improved efficiency and simplification across the business. We are also making focused investments in innovation to drive growth across the portfolio. We recently launched PeerView, a differentiated digital benchmarking application that enables hospitals to compare infusion data and drive infusion therapy best practices. This is strategically important for the ITP business because it enhances our digital roadmap for our infusion systems platform by including PeerView in our IQX platform as a core digital capability, further differentiating our infusion offering versus competitors.

In Front Line Care, we recently launched a limited market release of Vest APX Acute Care, an airway clearance device featuring a smaller and lighter platform, updated interface, and improved patient comfort. Early customer response has been positive, with full market release planned towards the end of Q3. Additionally, adoption continues to build for the Connex 360 connected patient monitoring platform, with strong order growth throughout Q2 and a growing sales funnel. In Care & Connectivity Solutions, early momentum for Dynamo, our smart hospital stretcher, continues with a strong commercial funnel and positive customer feedback. Additionally, we recently launched Dynamo in Canada, our first international expansion of the stretcher. Beyond product development, innovation is being advanced broadly across the company as we continue to prioritize using AI internally to work smarter, move faster, and operate more efficiently.

I am encouraged by the early progress we have made and even more excited about the future of Baxter. My visits with stakeholders around the world, engagement with our team, and conversations with our customers have validated the opportunity I saw when I decided to join the company. Baxter sits on a foundation of good businesses with leading positions and time-trusted brands, with clear opportunities for more rigorous execution to unlock our full potential and deliver consistent and sustainable earnings growth and long-term value for our shareholders. I will now turn the call over to Anita to provide more detail on our second quarter results, including segment-level performance, as well as our 2026 guidance. Anita, over to you.

Thanks, Andrew. Good morning, everyone. I'm happy to be joining the call this morning to cover the details of Baxter's second quarter financial performance, as well as commentary on our updated outlook for the remainder of 2026. Second quarter 2026 global sales totaled approximately $3 billion, an increase 5% on both a reported and organic basis. On the bottom line, adjusted earnings were $0.56 per share, a decrease of 5%. This decline reflects two known and expected headwinds that we have talked about previously. First, the roll-through of higher cost inventory produced at the end of 2025. Second, an unfavorable comparison to the prior year period, which benefited from a change in estimate that resulted in a reclassification between SG&A and cost of sales. These two headwinds were partially offset by an $0.11 per diluted share benefit related to an IEEPA tariff refund.

Now I'll walk through our results by reportable segment. Commentary regarding sales growth will be on an organic basis. As a reminder, beginning with our reporting this quarter, our pharmaceuticals business has been consolidated into the former Infusion Therapies & Technologies, or ITT division, within our Medical Products & Therapies segment. The combined division is now named Infusion Therapies & Platforms, or ITP. In addition, certain sales previously reported within other, primarily related to products and services provided through manufacturing facilities aligned with ITP, are now included within the division. Sales in our Medical Products & Therapies segment, or MPT, were $2.1 billion, an increase 5% in the quarter. Within MPT, sales of our new Infusion Therapies & Platforms division totaled $1.7 billion, an increase 4%. Growth was driven by drug compounding and IV Solutions. This growth was partially offset by lower sales within infusion systems and injectables.

Within IV Solutions, performance reflects growth off the new lower baseline of demand following clinical practice changes in the market. In infusion systems, results in the quarter reflect the net impact of lower sales due to the ongoing shipment and installation hold of the Novum IQ LVP, customer returns, and transitions to Spectrum. Importantly, demand for Spectrum IQ remains steady. Consistent with the first quarter, we did not see a material impact from Novum LVP related returns in the second quarter. Performance in the quarter also reflects continued strong demand for our drug compounding services, which grew double digits. This strength was partially offset by lower injectable sales due to supply constraints and continued softness in certain pre-mix products. Sales in Advanced Surgery totaled $331 million and grew 12%.

Results reflect continued strong demand and increased volumes from our global portfolio of hemostats and sealants, strong commercial execution across regions, and steady procedure volumes. MPT's adjusted operating margin totaled 19.3% for the quarter, decreasing 350 basis points. Results reflect higher manufacturing costs, including lower absorption and the unfavorable impact from the Section 122 tariffs. Performance also reflects the unfavorable prior year cost timing comparison, as well as a lower contribution from pricing. These were partially offset by the benefit related to the IEEPA tariff refund, as well as increased sales volumes. In our Healthcare Systems & Technologies segment, or HST, sales totaled $801 million, an increase 4% in the quarter. Within HST, sales of our Care & Connectivity Solutions or CCS division were $502 million and grew 5%.

Within CCS, performance was driven by strong Patient Support Systems volumes globally, including execution against the U.S. backlog and growth across international markets. To date in the U.S., we have not observed any change in hospital capital spending, and our order book continues to reflect solid demand. However, given broader macroeconomic uncertainty, we continue to closely monitor the environment. Front Line Care sales were $299 million and grew 2%. Performance in the quarter reflects continued momentum from Connex 360 and the timing of large customer deals relative to the first quarter. Partially offsetting these benefits were planned global product exits in the portfolio. HST adjusted operating margin totaled 20.3% for the quarter, flat compared to the prior year period. Results benefited from the tariff refund, as well as increased sales volumes. These benefits were offset by the previously discussed unfavorable year-over-year comparison related to cost timing.

Finally, other sales, which now solely represent MSA revenue from Vantive, totaled $83 million. As a reminder, these sales are included in our reported growth, but they are not reflected in our organic growth. Moving through the rest of the second quarter P&L. Adjusted gross margins were 38.6%, a decrease of 210 basis points driven by the previously discussed headwinds and cost of goods sold. These impacts were partially offset by the tariff refund benefit. Adjusted SG&A totaled $648 million, or 21.9% of sales, a decrease of 80 basis points. This reflects the benefits from previously implemented cost actions. Adjusted R&D spending totaled $125 million, or 4.2% of sales. TSA income and other reimbursements totaled $52 million in the quarter, which came in favorable versus expectations. This favorability was offset by higher TSA related expenses and therefore did not have a material net impact to earnings.

Altogether, these factors resulted in an adjusted operating margin of 14.2%, a decrease of 90 basis points. The year-over-year change reflects the same underlying factors discussed earlier, including higher manufacturing cost and the unfavorable prior year comparison, partially offset by the benefit from the tariff refund. Net interest expense and other expense totaled $59 million in the quarter. The adjusted tax rate for the quarter was 19.9%, driven primarily by the mix of earnings across jurisdictions. In total, adjusted earnings were $0.56 per share for the quarter. Before turning to our 2026 outlook, I want to comment on cash flow and liquidity. Second quarter free cash flow was $181 million, improving sequentially from the first quarter and reflecting continued progress in cash generation. This progress was driven by improved operational performance and focused execution across targeted areas of working capital.

We remain focused on strengthening cash flow generation and improving the balance sheet. Reducing leverage remains our top near-term capital allocation priority, and we continue to target approximately three times net leverage by year-end. Turning to our updated outlook for the full year 2026. For the full year, we now expect total sales growth to be 3%-4% on a reported basis. This reflects current foreign exchange rates, which are expected to contribute approximately 100 basis points to top-line growth for the year. In addition, reported sales are expected to include a headwind of approximately $25 million from MSA revenues from Vantive, representing approximately 30 basis points of impact on reported growth. Excluding the impact of foreign exchange and MSA revenues, we now expect organic sales growth of 2%-3% for 2026.

This reflects the stronger performance year-to-date and our expectation for continued growth in the second half. As it relates to the segments, in MPT, we now expect full year organic sales to grow low single digits. This reflects stronger year-to-date performance, including in drug compounding. As a reminder, the year-over-year comparison in infusion systems improves in the second half as we lap the shipment and installation hold of Novum LVP. Our outlook continues to incorporate potential customer uncertainty surrounding the Novum ship and installation hold. In HST, we continue to expect full year organic sales to grow low single digits, supported by anticipated contributions from both the CCS and Front Line Care divisions. Turning to our outlook for other P&L line items and key assumptions beginning with tariffs. We continue to expect approximately $40 million of impact, net of mitigating actions in the second half of the year.

TSA income and other reimbursements is now expected to range between $155 million-$165 million. Higher TSA income is expected to be offset by higher TSA related expenses, and therefore not expected to have a material net impact to earnings. We continue to expect full-year adjusted operating margin to range between 13%-14%. We now expect our non-operating expenses, which include net interest expense and other income and expense, to total between $260 million-$280 million. We continue to anticipate our full-year tax rate to range between 18.5% and 19.5%. We continue to expect our diluted share count to average approximately 518 million shares for the year. Given the tariff refund in the quarter, we are raising our full-year adjusted earnings from $1.85-$2.05 per diluted share to $1.95-$2.15 per share.

While we are not providing quarterly guidance, I will offer some additional color on how we expect performance to progress over the remainder of the year. Overall, we are reiterating the framework we have consistently laid out for 2026. Known mechanical headwinds in the first half, followed by expected improvement in the second half. The drivers of this improvement remain consistent with what we laid out last quarter. First, we continue to expect higher volumes and the associated operating leverage in the second half of the year relative to the first half. This is consistent with our historic seasonality and aligns with our updated outlook for sales. Second, we continue to expect to see the benefits from the cost structure actions taken earlier this year. As I noted in the quarter, we have already begun to realize these.

Third, as previously referenced, the higher cost inventory produced at the end of 2025 has now rolled through our P&L. With respect to free cash flow, our performance through the first half represents meaningful progress and supports our expectation for improved free cash flow generation in 2026 relative to 2025. In closing, I am also encouraged by both our second quarter results, as well as the continued traction we are seeing across the organization from Baxter GPS. 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 star followed by the number one on your touch-tone phone. If you wish to remove yourself from the queue, press star one again. If you are using a speakerphone, please lift the handset to ask your question. That we may be respectful of everyone's time, please limit your comments to one question with one brief follow-up. We appreciate everyone's consideration as we 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. Your first question from the line of Robert Marcus of JPMorgan.

Great. Good morning and congrats on the nice 2Q. I will ask both my questions up front here. Clearly a better than expected result on the top and bottom line in second quarter. I would love if you could speak to some of the drivers of the acceleration on the top line and the confidence in the guidance raise. Same question on the bottom line, but it does appear like there were a number of one-time items in 2Q, and you did raise the EPS guide less than the 2Q beat, implying perhaps softer second half underlying EPS. Then on 2027, given the one-time items, do you still feel confident you will be able to grow EPS next year? Thanks a lot.

Yeah. Hey, good morning, Robbie. Look, if I do a step back, I'll walk through this for you in pieces. First, we're pleased with the quarter. This demonstrates continued steady progress on our strategic priorities and improved execution across the business. Even more importantly is we saw broad-based operational performance improvement and all segments and divisions were growing. A couple call-outs. In MPT, we saw strength driven by double-digit growth in drug compounding. We also saw continued strong performance in our Advanced Surgery business, and also, while the baseline was lower, we saw a strong performance in our IV Solutions organization. In HST, CCS benefited from strong Patient Support Systems demand, and within our FLC business, our Connex 360 product line continues to resonate well with customers, and we see improved performance on our funnel and our ability to execute.

As a reminder, and I did walk through this, or we did walk through this in our prepared remarks, there was a tariff refund that was not contemplated initially. It's about $0.11. Absent this, we continue to be focused on how we're going to strengthen the organization and continue to perform. As we look at 2027, the path to 2027 is through execution in 2026, and especially the second half of 2026. While certainly pleased with the quarter, it's one quarter. Our team is focused on driving the business and continuing to execute through the remainder of the year. As we know, the non-reoccurring tariff benefit won't flow through next year. We're going to give you additional color on 2027 at the appropriate time. Right now, we're focused on executing in 2026.

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

Hey, congrats. I guess Q2 was a pretty high CD ratio. Nice to see. Maybe I would start with the Q2. I'm curious how big the drug compounding was in Q2. How much of that, was that 20% plus? Is that something that drove more of the upside this quarter? Just given the mix on gross margin was a little bit light. If there's anything you could say on drug compounding this quarter and how much that was of the beat.

Hey, Travis, this is Kevin. We did call out drug compounding as a good chunk of the beat in the quarter. When you think about our raise for the second half of the year, it kind of reflects what we saw in the second quarter. It grew double digits. You're absolutely right, that inherently does have lower margin. That does impact our mix.

I do want to add on this a little bit. While we're certainly pleased with the double-digit growth, additionally, this business has favorable cash conversion and there is some improvement on where we're focused on driving margin at a better place. Overall, again, pleased with this. We have some work to do to get this more in line with the overall Baxter performance.

Makes sense. I did want to push a little bit more on the guide. The earnings beat $0.19 this quarter. Tax, the tariff refund $0.11, TSA $0.04, lower interest $0.02-$0.03, only raising by $0.10. Is this just being conservative on the second half? Curious how you're thinking about the TSA income dynamic and the headwind for next year. Is that something you can offset or have to lap?

Hey, Travis, let me start real quick just on the TSA. Then I'll turn it back to Andrew on kind of the overall confidence in the second half. We did see higher TSA income in the quarter than we were expecting. Importantly, we also saw higher TSA-related expenses. When we think about it at a net level, at the operating income, it was not a material impact. It's the same story for the full year. Yes, expecting higher TSA income. You should think about it as not a big change when we're thinking about dropping through to the bottom line.

Yeah, not much more to add here except, look, we're pleased with the performance in the quarter. A lot of work remains and our team is very focused on this. It's just one quarter. To your point, CD ratio, we are very focused on executing for the second half of the year, getting ready for 2027 and aligning the organization around how we perform. At its core is how we align GPS in action and that becoming our driver across the organization.

Larry Biegelsen of Wells Fargo is on the line with a question. Larry, your question please.

Good morning. Thanks for taking the question. Congrats on the progress here, Andrew. Maybe a little bit more of an update on Novum IQ. You talked about it early in the validation process. What are the next steps here, Andrew? If you don't get Novum back on the market, how durable is Spectrum IQ as a workhorse pump?

Yeah. Good morning, Larry. A couple items here. Punch line is we're making progress. Now we continue to closely work with regulatory authorities. We support our current Novum LVP customers. They're working with the mitigating actions that are in place. As we do a step back, we like our total pump portfolio. We have Novum Syringe, we have Spectrum LVP, and they're on the IQX platform. As I mentioned in my prepared remarks, we've even launched PeerView that enables these to truly bring higher value for our customers. Overall, we're pleased with our total offering. We're pleased with the value proposition it brings to customers. We're continuing to drive to when it's ready, launch Novum LVP. That said, we're very focused on bringing that value to customers today. Continuing to expand our value proposition.

That's helpful. Andrew, obviously compounding was strong. You talked about that earlier. Talk about injectables and anesthesia, what the plan is to turn that around. When we had visibility on that, those were declining, I believe. Thanks for taking the question.

Absolutely. Look, this business, it remained pressured due to ongoing supply constraints and continued softness in premix. Now, we are taking very specific actions to improve some supply conditions, select products. There's an area, and I've talked about this in the past, and we're staying very focused on a contract manufacturer, and that does remain constrained. We are working extremely close with them on how to improve operational efficiency, how to align around product and continued high level of quality within the solution set. Just to outline this, our full year guidance does have this built in, so we are in our stages around how do we execute and continue to perform in this space. We have taken that into account our full year.

Vijay Kumar of Evercore is on the line with a question. Vijay, your question please.

Hi, Andrew. Good morning, and congrats on a nice sprint here. Maybe just on this performance within second quarter, Andrew, some questions around were there any one-timers. Was there any restocking benefit from IV fluid? I know the market went through a rebasing effort, if you will. Also, any quarter-end phenomena. Talk about phasing in the quarter, anything that stand out to you.

Yes. Let me take those in two areas. First, in IV Solutions, look, we didn't see a massive restocking, so I'd say it's not material in our overall IV business. That said, this is the new norm, and we've talked about how this is the baseline and how our product set and our alignment with customers, we bring a high value here. We feel good about our market position, but we don't rest on this. We're always focused on how to improve for our customers and align this business to execute. We have a high value creation. We have the ability to help our customers as they utilize this solution set, but we are at the new norm within the business.

The second piece of your question throughout the quarter, look, all is I can say is we saw broad-based strength across the business, and certainly, when we look, and I called out a few of the areas that we saw some additional increase throughout the quarter. We're pleased across the board. That said, we've got a lot of work to do to finish the year strong, and our teams are very focused on rolling our sleeves up, continuing to execute, and utilizing our GPS as our guide forward.

That's helpful, Andrew. Maybe one more product-related question, if you will, on Connected Care. There's been some concerns around maybe cautiousness by hospitals on utilization, and maybe that spills over into their CapEx outlook. Can you talk about your order book within Connected Care? That business did well. Any signs of slowdown that we're seeing from a customer CapEx spending standpoint?

Couple items here, and I'll walk through what our teams are executing to. I'll walk through my current engagement with customers and how we view this space. Demand remains stable, and this is really supported by U.S. strong capital order book and funnel visibility across PSS and our GSS business. We've continued to see our ability to support our customers as they're investing for the future. That said, we are staying very close to this market, and we want to ensure that we are aligned with their needs. I will also additionally add that I have met, and part of my standard work as a CEO is to meet with customers on an ongoing basis, and what we're hearing from them is a few items. First, their continued focus on how they're investing to improve their workflow, improve their process alignment to our business.

Number two, I've been able to see real-time, firsthand how our new stretcher is resonating with our customers and the excitement that they have around this Dynamo platform and what it's going to mean to them as far as the ability to utilize this in their network. Early days, but certainly pleased with the progress. All that to be said of, we are not immune. We continue to stay very focused on this to ensure we've got alignment for our business.

Pito Chickering of Deutsche Bank is on the line with a question. Please state your question.

Hey, good morning, guys. Thanks for taking my question. I'm going to ask the drug compounding question a little differently. Just looking at the organic revenue guidance raise of 200 to 300 basis points and the implied EPS the back half of the year is a little lighter than the Street, despite some good guys like interest. What is the margin contribution of the guidance raise that you put into guidance?

Hey, Pito, this is Kevin. Just to kind of reiterate a couple of points, drug compounding, a good chunk of the performance in Q2, and when we think about overall first half performance, organic sales grew about 2%. Our new full-year sales outlook of 2%-3% means we expect sales to be at that growth rate or higher. Continued momentum. When we think about the EPS guidance raise, I think the easiest way to think about it is that reflects the tariff refund that we received in the quarter. That was $0.11. That was one time in nature. That was not previously included in our EPS guidance, and that is what the new EPS guidance reflects, is the inclusion of that refund in Q2.

Okay. Let me ask this I guess a little differently. You're raising EPS by the tariff. You're increasing revenue in the back half of the year on continuation, but there's no EPS flow through on that despite it, I think $0.03 coming from better interest rates. I guess, can you give me the good guys and bad guys on margins in the back half of the year versus previous guidance and things like oil and shipping costs for keep with that in there as well. Thank you.

Yeah. I think the punchline is from an operating margin standpoint, we've been pretty clear about first half headwinds followed by expected improvement in the second half. The new item this quarter is the tariff refund, which is non-recurring, in Q2. If you're thinking about kind of modeling on a sequential basis for the balance of the year You normalize for the tariff benefit in Q2, you think about the drivers for sequential improvement that we've talked about. Higher volumes in the second half, benefits from the cost structure actions. We've already seen that start to manifest in our Q2 results, rolling through the higher cost inventory produced at the end of 2025, which importantly, we saw that recognized in the first half of the year. That item specifically is going to be a Q2 to Q3 sequential improvement.

I think, again, as kind of an overall, the framework we've laid out is consistent. Obviously, the first half of the year from a top-line has come in a bit stronger than we expected, but we are still very confident on the full-year guidance and reiterated kind of the same underlying operating performance that we had before.

Just to add additional minor color around the supply question. Look, it's something we continue to closely monitor. Like everyone else, we've seen some pressure here. It has been manageable and it's within our guidance. To be very clear, it's within our guidance. Overall, I would say we're taking a very proactive approach on where we might have challenges, we take mitigating actions and align around what actions are going to get us back in line. On oil prices, I've talked to that quite a bit. With the Vantive spin, it's obviously lesser of an impact on our business, therefore we're continuing to monitor it. That said, we've been able to offset.

Patrick Wood of UBS is on the line with a question. Please state your question.

Beautiful. Thanks for taking the questions. I'll ask them both upfront. I guess first one, if you could unpack a little bit more on the Advanced Surgery side, the hemostats and sealants growth. That's stayed a lot stronger for a lot longer than at least we had anticipated. That's one. The second one, I know you're not guiding on 2027, but as we contemplate 2027 and the TSA income that comes out, is that still EPS neutral in that year, or is this something that we should at least be conceiving could be a factor to put into our model for next year? Thanks.

To walk through Advanced Surgery. Look, pleased with the progress here. Strong performance for the team, strong alignment with customers, and having traveled with this team and having been seeing firsthand with our customers our product set, our enablement, and how our customers really look to us to help in the patient and having high patient care really aligns with our mission. Saving sustained lives at Baxter is very important to us, and this business is front and center on that. Strong performance, strong growth. The team continues to align around strong demand and increased volumes for our global portfolio. Execution, and staying very close to our customers through this. As far as 2027, look, of course there's a lot of moving parts. We're laser-focused on finishing 2026 strong.

We have aligned around the actions we have to take as an organization and being very focused on what those align to for getting us ready as we finish the year and get ready for 2027. We will provide more color on 2027 as the year comes closer. That includes TSA, that includes a continued view on markets, and ensuring that we've got clear focus on how we want to execute to finish the year out.

Joanne Wuensch of Citi is on the line with a question. Please state your question.

Good morning, and thank you for taking the question. Really nice revenue results. I have two quick ones. The first one has to do with just the overall hospital environment and procedures. There is a pretty active debate out there on how much changes to the ACA is impacting procedures. With your presence in the hospital, I suspect you have a frontline seat. The second one is I just want to make sure I understand the moving parts and gross margins impact of tariffs on the second quarter specifically, and then how should we think about full year gross margins and that strength or recovery. Thank you.

All right. I'll take the first part of that. Look, if I just do a step back, overall, we're not seeing any changes with behavior from our customers and the overall environment. We're staying very close to this. We're not immune. That said, we have not seen a change in behavior and/or view on our product set. We are staying very close around this. As a reminder, I visit customers often. We align around understanding what their needs are, and we're launching new products to expand that and to truly support their focus on patient care and also workplace optimization. Baxter has a strong ability to support that.

As far as gross margins for the full year, we haven't provided explicit guidance at the gross margin level. When you think about some of the items we've talked about and some of the moving pieces, mostly focused on operating margin, they're obviously relevant to gross margin. Obviously the tariff refund in Q2 was a positive. Rolling through the higher cost inventory, that was the largest headwind this quarter. As we've noted, importantly, we've now cycled through that. If you're looking at Q2 as kind of your starting point after normalizing for the tariff refund, you should expect sequential improvement for the balance of the year.

Rick Wise of Stifel is on the line with a question. Please state your question.

Hi, good morning, Andrew. Two questions. My first is on Front Line Care. Up 2% in the quarter. Anita, you highlighted the planned product exits. My question is, can you quantify the specific 2Q impact on growth? What would it have been ex that? Maybe it wasn't large enough to really quantify, but when do we get past that? Maybe a bigger question is how do we think about Front Line Care growth going forward? Or what are you aspiring to? Is this a mid-single digit grower? Is there something in the innovation pipeline that's going to change the trajectory? Then I have a follow-up. Thank you.

Hey, Rick, this is Kevin. Maybe let me start here just talking about the Q2, then I'll turn it back to Andrew for a broader innovation discussion. As it relates to Q2, Connex 360 did contribute to the growth year-over-year of Front Line Care. Obviously, in the context of total Baxter, it's less of a contributor. But for Front Line Care, it was impactful in the quarter. Andrew, maybe a little more on the second part of his question on innovation more broadly.

Yeah. The piece on planned exits, I would say they're not material, but we do monitor these. I'll just say a couple items on this business and overall. We are focused on really alignment to where we have value creation for customers. Part of that is going to be strong portfolio management. Look, I'm a markets first person, so we want to understand where we have value for customers, align where that value is, and ensure that we're not only launching products to meet that and expand that, we sustain our solution set that's going to keep our customers in a good place. So think about this as base hits, that constant drive to always get better, be better, and be in front and relevant in front of our customer base. Overall long term within this business, we've seen improvement.

It's early days, I would say that the leadership team is really laser focused on how to execute and the right value creation for customers and then ultimately what that means for the business growth.

Yeah. Andrew, this is more for you and sort of a big picture question. Obviously, these are your words you said earlier, you've made continuous positive progress. It's impressive. It's good to see the quarter. I know you're pleased with the progress. I suspect my sense of you is I doubt you're satisfied. My question is where has it gone better, faster, bigger than you? What's the biggest, better, faster thing that's happened that you're pleased about? Where are you, I don't want to say disappointed or frustrated, but where would you have wished it could go faster? Maybe talk to us about how you personally are evolving your focus to make the faster stuff go faster and make the stuff that's maybe been a little slower than you would have wanted turn around better. Thank you for that.

You bet, Rick. Let me just walk through a couple items. I've been very pleased with how GPS has taken shape across the organization. Look, having done this before and I've been a part of many organizations that have aligned, the team at Baxter has really embraced this. If I were to coin a phrase, boring in consistency, brilliant in execution. We want to be consistent and we want to continue to execute. The nuance that I want you to think through is, and I reference this, and think about this, year-to-date, we have done over 400 continuous improvement events. We have almost 200 in flight, and we have another 400 planned in the pipeline. When we think through that is the driving force. As if you look at the flywheel of our GPS system, it starts with strategy.

It starts with understanding the markets, understanding the position, understanding the products, then it aligns to what are the breakthroughs that we want to drive within each business, within each segment? Then it goes to how we're going to measure KPIs. We look at annual, we look at quarter, we look at monthly, we look at daily where possible. Then it's on our teams to execute. I travel a lot. I get to see firsthand how the teams have embraced this concept, this drive, their passion for making tomorrow better than today. I can go reference point after reference point. I can give examples after examples. To me, that's how we think about the future. There's no one innovation that will define our future. There's no one continuous improvement event that will define.

It's the accumulation and combination of all of them that puts us in that execution cadence. That said, it starts with leaders. Even this week, we have a leadership team here that's going through their view on how to get better every day, how to build capable teams, that drive and that passion around making tomorrow better than today. We're early in our journey. You nailed it in the question, which is, am I ever satisfied? No. I'm in that constant drive to always get better, but I am pleased with our progress. That said, one quarter is one quarter. It's that drive to finish the year strong, get ready for 2027, launch new exciting products that are base hits, and build the team's momentum around how we continue to perform, continue to drive. Thank you for the question.

Matt Taylor of Jefferies is on the line with a question. Please state your question.

Hi. Good morning. Thank you for taking the question. First, I wanted to ask a follow-up on the operating environment, because there are several places in the release and the materials where you talked about stable demand for patient support for your products. It really seems like you're saying nothing's changing with CapEx spending. Could you be specific? Are you seeing any impact from ACA or HCBS subsidies or Medicaid? Do you expect any impact from that? If you could help to frame that risk at all, that'd be great.

Yeah. A couple items here. Look, we are not immune. We stay very focused on this. Look, we assess customer base. We go through all the external documentation. What I can tell you is net-net, we've not seen a massive change in behavior, in buying behavior. We're staying very close around it. I walked through a little bit of that earlier around funnel, around outlook. Again, we're seeing strong demand for our product set. That said, we're staying very close to this to ensure we've got alignment with customers on their buying behaviors and their needs. Overall, no update on our expectation. That said, it's something we are continuing to monitor and continuing to assess.

Got it. Thank you. Could I ask one follow-up on 2027? I know you're not going to be specific, but previously you had talked about confidence in at least being able to grow the top line in earnings in 2027. Can we still assume that's the case, or maybe you have more confidence in that now that you've produced good results here in Q2?

A couple things. I'll just walk through it. Look, we are pleased with our progress. No one quarter is going to define us. Now we're pleased with the progress in Q2. That said, as I talk to the team, look, we've got a lot of areas we want to target and drive in the second half of the year. Certainly, we don't want that to get ahead of ourselves. As we look at 2027, to get there goes through 2026. We'll give update and color at the appropriate time. Right now we are laser focused on executing for the remainder of the year.

Josh Jennings of TD Cowen is on the line with a question. Please state your question.

Hi. Good morning. Thanks for taking the questions. Andrew, I know Baxter's had some comp variability as we're trying to assess each business unit and the go forward, as Matt's question addressed about 2027. I was hoping to just get an update on your team's view on the weighted average market growth rate of the portfolio. I know various business units, many different product lines. Historically, we've thought of the weighted average market growth rate of Baxter's portfolio around 3%-4%. Does that hold true when comps stabilize and as you look forward? Where do you see Baxter's portfolio? Which business units are primed to gain share as you reach that steady state in maybe in 2027 and beyond? Thanks for taking the question.

You bet. Look, if I just do a step back, look, we view this as a low single digit area, and that's overall. If we then piece this apart and we go into different areas of the business, we've obviously seen and continue to see strong areas and I'll just call out a couple. We've seen strong performance in our Advanced Surgery business. Compounding has obviously been a strong grower. That said, all of our business are focused on executing and bringing value and innovation to our customers and alignment to that cadence around that. What gets me excited as we continue our execution journey is how, and I know we didn't talk about this, but how we're looking at leverage.

We talked in our prepared remarks around getting to approximate 3x by year-end, obviously gaining confidence in that, gaining ability, and what that means for our future. How we think about capital allocation with our alignment to internal investment as well as potential tuck-in M&A, as well as other opportunities that are going to really be part of the future narrative. That said, it's about execution. It's about how we align. It's about GPS being at the core of everything we do and our people to align to that future. Thank you.

There are no further questions at this time. I will now turn the call back to Andrew for closing remarks.

Thanks, operator. We are encouraged by the progress we're making and remain focused on the work ahead. Our turnaround is gaining traction. Execution is improving. We're building momentum across the business. We believe this positions Baxter to deliver more consistent performance, sustainable growth, and long-term value for shareholders. Thank you for your time. Appreciate the interest. Stay safe and goodbye for now.

Ladies and gentlemen, this concludes today's conference call with Baxter International. Thank you for participating.

Baxter International (BAX) Q2 2026 Earnings Call Transcript

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