$2.86
$17.67
bear $2.86
base $12.71
bull $17.67
margin of safety $7.50
market price* $25.28
Baxter International sells hospital products: IV solutions, infusion pumps and IV sets (Medical Products & Therapies), hospital beds, patient monitoring and care-team software that came with the Hillrom purchase (Healthcare Systems & Technologies), and injectable drugs (Pharmaceuticals). This valuation covers the business as it stands today, after the 2023 sale of BioPharma Solutions and the early-2025 sale of the kidney-care business (now Vantive). Sales were $11.2 billion in 2025, about 54% in the United States. How we measured earnings. We look at the cash the continuing business produces after the upkeep of its plants and equipment and after stock compensation, with swings in working capital removed. On that basis, owner earnings were about $617 million in 2022, $512 million in 2023, $507 million in 2024 and $454 million in 2025 (about $1.22, $1.01, $0.99 and $0.89 a share). Because Baxter's debt is valued separately below, we add back the cash interest it paid ($355 million, $484 million, $401 million and $303 million) to see what the business earns before its lenders are paid: about $972 million, $996 million, $908 million and $757 million. Depreciation, amortization and impairment charges are not deducted because they use no cash. They are still a warning: Baxter wrote off $425 million (2024) and $485 million (2025) of goodwill in its Hillrom Front Line Care unit, which says the acquisition has not earned its price, and much of the roughly $1 billion of yearly depreciation and amortization reflects acquired products that wear out. For that reason we credit no growth on top of the starting level in any case. Even though sales have grown 3% to 6% a year since 2022, cash earnings have shrunk, so sales growth is not evidence of cash growth. Starting level and near-term path. We use $832 million a year, the midpoint of 2024 and 2025. Those are the years closest to today's business; 2022 and 2023 were higher but we do not assume a return to them in the middle case. Business cash flow fell 17% in 2025, from $908 million to $757 million. The middle case assumes a 3% rise in 2026 ($780 million), then 3% a year to $832 million in 2028, and flat after that. The reasons for a modest 2026 upturn: about $105 million of Novum infusion-pump recall and related charges booked in 2025 are not assumed to repeat, and the June 2026 quarterly report shows first-half sales up 4% ($5.66 billion versus $5.44 billion). First-half operating cash flow jumped from $118 million to $510 million, but most of that is working capital (mainly a large inventory build in early 2025 that did not repeat). Using the main working-capital lines disclosed, cash flow before working capital looks roughly flat to slightly higher, so we did not raise the starting level beyond $832 million. Middle case. The business is worth about $13.8 billion ($832 million a year, discounted at 6%, with no growth credited). Net debt and commitments total about $7.2 billion, leaving roughly $6.6 billion, or about $12.71 a share. The debt figure starts from $9.48 billion of borrowings at December 2025 (the June 2026 debt breakdown was not available). We reduce that by about $1.0 billion because most of the notes carry coupons well below 6% (average about 3.4%) for years to come. We then subtract $1.4 billion of the $2.15 billion of cash at June 2026 (holding back about $750 million the business needs to operate) and add $136 million owed to Vantive (a $83 million capital-spending reimbursement and a $53 million net indemnification liability). Once Baxter sold its kidney-care business, it is also paying down debt (debt fell from $13.1 billion to $9.5 billion during 2025). The lasting earning power comes from what Baxter already has: one of the largest IV-solution franchises in the United States and an installed base of pumps, beds and monitors that keep generating supplies and service. Low case. Business cash flow stays at the 2025 level of $757 million and erodes 3% a year for ten years, to about $558 million, then holds flat. The evidence is two straight years of write-offs in Front Line Care and the July 2025 halt to Novum pump shipments in the U.S. and Canada, which has no release date. On the debt side, lenders relaxed the leverage limit on the revolving credit line in November 2025 for four quarters through September 2026, and about $4.5 billion of notes mature between 2027 and 2030. We assume these are refinanced at market rates, so we give no credit for today's low coupons and add about $0.3 billion of extra financing cost, for economic debt of about $9.8 billion. The business is then worth about $10.0 billion, net debt and commitments come to about $8.5 billion, and about $1.5 billion is left, or about $2.86 a share. Business cash flow stays well above the roughly $300 million of interest, so the shares keep positive value even here. High case. The Novum shipping hold is lifted (corrections are under development) and cash flow returns to the levels Baxter has already produced: $830 million in 2026, $910 million in 2027 and $996 million (the 2023 level) from 2028, flat afterward. The business is worth about $16.4 billion, net debt is the same $7.2 billion, and about $9.2 billion is left, or about $17.67 a share. What we left out. We give no credit for new products, a Novum relaunch beyond a return to earlier cash levels, margin improvement, tariff relief or a turnaround at Front Line Care, because none of these is yet secured or demonstrated in the cash results. Tariffs on medical devices and supply-chain problems, including hurricane damage at the North Cove, North Carolina plant in 2024, are disclosed risks that could pressure the low case. Change since our last analysis. We previously estimated $9.30, $28.29 and $61.94 for the low, middle and high cases. The new values are lower mainly because those figures assumed earnings would grow 4% to 9% a year from a $700 million starting point, and we now credit growth only where the cash results show it. We also now value the business first and then deduct its debt. Some things improved: debt is down $3.7 billion, and first-half 2026 sales are up 4%. What would make this too low: a lasting return to 2023-level cash flow with real growth, or a faster Novum recovery. What would make it too high: further write-offs in Front Line Care or a costly refinancing of the 2027-2030 maturities. One item we could not fully pin down is the exact remaining life and rate of each note tranche, so the $1.0 billion low-coupon credit is an estimate built from the tranches listed in the annual report.