Baxter: CEO Retires Suddenly, While Tariffs Create Another Profit Hurdle

Baxter International BAX announced longtime CEO Joe Almeida would be retiring immediately, without a successor in place, while suggesting that the firm’s 2025 guidance would likely decline due to new US tariffs on China, Mexico, and Canada. Shares fell about 2% on the news.

Why it matters: It looks like Baxter’s management team didn’t have its arms around another key pressure point, which has been a problem since inflationary pressures started roiling the company’s results and guidance in mid-2022.

• We previously thought Almeida was on a short leash as a leader due to these problems, and another guidance shortfall suggests his attempts to right the ship were not working.
• Uncertainty may rule as investors wonder how a new leader will attempt to turn around this top-tier medical supplier.

The bottom line: We are reducing our near-term profit assumptions to consider the potential hurdles that tariffs may create for Baxter’s profits. This has pushed down our fair value estimate to $55 per share from $62. The stock still appears undervalued.

• We are also reducing our Capital Allocation Rating to Poor from Standard, as the firm looks likely to fall short of its previous goals—a recurring concern that suggests a material execution issue at Baxter that may be difficult to repair quickly.
• Uncertainty surrounds the firm’s near-term prospects, although our High Uncertainty Rating probably reflects this situation adequately. Moreover, the limited movement on this news may reflect the low expectations already worked into recent share prices.

Coming up: Baxter plans to hold its earnings call on Feb. 20, a week later than previously scheduled, as it works to fully reflect the tariffs and potential offsets in its outlook.

• The firm’s lead independent director, Brent Shafer, will serve as chair and interim CEO.