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Baxter International (BAX) has four divisions: Medical Products & Therapies, Healthcare Systems & Technologies, Pharmaceuticals, and Kidney Care. The stock aggressively sold off ~65% due to supply chain issues, Hillrom impairment, and most recently, on fears that GLP-1 anti-obesity drugs will impact medical device suppliers. 

The stock’s average historic P/E is around 19x. It was recently trading at 12x 2024 profits. Revenue guidance is +4%-5% prospectively.

Meanwhile, margins are improving sequentially across all segments. It doubled the Free Cash Flow YTD on a year-over-year basis. And it’s a double-digit compounder over decades (ROIC).

Baxter also has several catalysts for recovery. They include the company’s sale of BioPharma Solutions for $4.25B, with the proceeds being used to pay down debt (something that reduces interest expense by $180M). BAX is also spinning off its Kidney Care business to shareholders. Doing that with the firm’s slowest-growing segment should allow the parent company to get re-rated for faster growth and a higher multiple prospectively.

Additional product launches and operating efficiency expectations should also help the stock. I think it can work its way up to $60+ over the next 12-18 months.

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