What happened
Shares of Baxter International (BAX -0.34%) were sinking 12.4% as of 12:18 p.m. ET on Thursday. The decline came after the company reported its 2022 full-year and fourth-quarter results.
Baxter announced fourth-quarter sales of $3.9 billion, up 11% year over year. This result topped the consensus Wall Street revenue estimate of $3.77 billion.
The medtech company posted Q4 earnings of $181 million, or $0.36 per diluted share, based on generally accepted accounting principles (GAAP). Baxter's adjusted non-GAAP earnings in the fourth quarter were $444 million, or $0.88 per diluted share. This fell short of the average adjusted earnings estimate of $0.94 per share.
So what
An earnings miss is enough by itself to cause a stock to fall. However, I suspect investors were even more displeased by Baxter's guidance.
Baxter expects 2023 Q1 sales will decline by around 3% year over year. It projects adjusted earnings per share (EPS) of between $0.46 and $0.50. Even the upper end of this range is well below the consensus EPS estimate of $0.76. For full-year 2023, the company looks for nominal sales growth of 1% to 2%. It forecasts adjusted EPS of between $2.75 and $2.95. Wall Street expected full-year adjusted EPS of $3.56.
Now what
The primary factor behind Baxter's weak guidance is also the main thing that could impact the company's fortunes going forward: inflation. Baxter thinks that inflation pressures will ease up somewhat in the second half of 2023. The company should also benefit more from its cost-cutting initiatives in the latter part of the year. This could bode well for Baxter's earnings to improve in the not-too-distant future.
