Baxter (NYSE:BAX) shares took a hit today as mixed fourth-quarter results included plans for restructuring and workforce reductions.
Shares of BAX dipped 11.4% at $40.48 apiece in mid-morning trading today. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — rose 12.2%.
The company’s quarterly results included an update on its new operating model progress and cost reduction efforts. Last month, Baxter announced plans to spin off its renal care and acute therapies units. That includes a restructuring plan.
Today, it said it expects its new process to complete by early in the second quarter with updated reporting framework set for implementation during the second half of 2023.
In response to “significant macroeconomic challenges,” Baxter began to implement a cost reduction program. The program runs parallel with its operating model reshuffle and it expects to complete it later this quarter. Baxter anticipates savings of more than $300 million, but it includes a “global workforce reduction of less than 5%.”
Baxter listed 60,000 employees in its most recent annual report, which means the layoff could affect up to 3,000 workers.
“While the opportunities ahead are clear, the journey will involve some difficult decisions,” José (Joe) E. Almeida, Baxter chair, president and CEO said. “We will take these necessary steps with the utmost care and sensitivity, in full knowledge that the passion and commitment of our Baxter team drives our success.
“We are poised to emerge transformed for a new era, better positioned to compete in the dynamic healthcare marketplace and create value for our stakeholders.”
More details on Baxter’s fourth-quarter results
For the quarter, Deerfield, Illinois-based maker of renal care products, drug delivery devices and more posted profits of $181 million. That amounts to 36¢ per share on sales of $3.9 billion for the three months ended Dec. 31, 2022.
Baxter recorded a 23.9% bottom-line slide on sales growth of 10.6%.
Adjusted to exclude one-time items, earnings per share totaled 88¢. That fell 6¢ short of projections on Wall Street. However, Baxter posted a sales beat as analysts expected revenues reaching $3.77 billion.
“Ongoing macroeconomic challenges and supply chain headwinds continue to weigh on business performance, underscoring the need for decisive action to create value for the patients, shareholders and other stakeholder communities that rely on us,” Almeida said. “I am confident that the plans we announced last month to spin off a new kidney care company and implement a new operating model for our remaining businesses will enhance the potential for growth and innovation across both entities.”
Baxter expects sales growth between 1% and 2% in fiscal 2023. It projects adjusted EPS between $2.75 and $2.95. The company said its guidance reflects “a challenging first half of the year.” It attributed those challenges to the increased cost of sales thanks to elevated costs of inventory produced in the second half of 2022.
The company noted that it demonstrates the “significant inflationary pressures” it experienced. However, Baxter expects the impact to begin to ease in the second half of 2023.
