What Could Hurricane Helene Imply for BAX?

Baxter International has issued updates regarding the effects of Hurricane Helene on its manufacturing facility in North Cove, North Carolina. This facility, which is the company’s largest and plays a crucial role in producing intravenous (IV) solutions and peritoneal dialysis (PD) solutions, has experienced flooding, resulting in a complete halt to production.

In a recent press release, Baxter highlighted that it is collaborating with various federal and local agencies to evaluate the extent of the damage and to facilitate the swift restoration of operations.

Analysts at BofA have estimated that the North Cove facility is responsible for around 60% of the U.S. IV solutions market, which could lead to an estimated revenue impact of approximately $2.5 million per day for Baxter’s Infusion Therapies and Technologies business. They project a potential revenue loss between $100 million and $150 million, depending on the duration of the shutdown. Nonetheless, they pointed out that Baxter has existing inventory and is actively looking at ways to utilize its global manufacturing network to alleviate supply chain disruptions.

Morgan Stanley analysts have drawn parallels to the 2017 hurricane that impacted another Baxter facility in Puerto Rico. They believe that the size of the North Cove facility could result in a sales impact of $140 million to $190 million for the fourth quarter of 2024, although they caution that the situation is still evolving and precise damage estimates are challenging to determine.

While the financial repercussions are expected to be temporary, BofA suggests that this incident could reduce Baxter’s organic sales growth by roughly 3.5% for the fourth quarter. Additionally, Wells Fargo has observed that, during the production halt, Baxter has instituted a 48-hour shipment hold and is focusing on redistributing inventory to lessen disruptions in patient care.

They also note that, despite the significant damage to the facility, it is unlikely to have a long-term effect on Baxter’s mid-term financial outlook.