What Happened?
Shares of healthcare company Baxter International (NYSE: BAX) fell 3.7% in the afternoon session after the U.S. Commerce Department initiated a national security investigation into medical equipment and devices, raising concerns about potential tariffs.
The probe, conducted under Section 232 of the Trade Expansion Act, examines whether imports of items like syringes, infusion pumps, and surgical instruments pose a national security risk. Such investigations can pave the way for new import duties, creating a significant overhang for the sector. The goal of potential tariffs would be to boost domestic manufacturing by increasing the cost of foreign goods. This development has introduced new uncertainty for the industry, leading to broad-based declines in the stocks of major manufacturers, including Baxter International and GE HealthCare, as investors weigh the potential impact on supply chains and costs.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Baxter? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Baxter’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about 2 months ago when the stock dropped 20% on the news that the company reported disappointing second-quarter results and cut its full-year profit forecast, citing the lingering impact of a hurricane.
The healthcare company pointed to the lingering effects of Hurricane Helene, which damaged a key manufacturing facility and disrupted the supply of its IV solutions. Baxter’s adjusted earnings per share of 59 cents missed analysts' estimates, while revenue of $2.81 billion also came in slightly below expectations. In response to these challenges and what management called demand softness, the company lowered its full-year profit guidance. The weak results and revised outlook prompted a negative reaction from investors.
Baxter is down 25.9% since the beginning of the year, and at $21.68 per share, it is trading 44.3% below its 52-week high of $38.91 from September 2024. Investors who bought $1,000 worth of Baxter’s shares 5 years ago would now be looking at an investment worth $272.16.
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