In a report released today, Allen Lutz from Bank of America Securities maintained a Sell rating on Owens & Minor, with a price target of $4.70.
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Allen Lutz has given his Sell rating due to a combination of factors impacting Owens & Minor’s near-term outlook. The company is currently navigating through several transitional challenges, including the divesture of its Products and Healthcare Services division, the transition from the Kaiser contract loss, and costs associated with the Rotech deal and Kitting facility. These factors create uncertainty in terms of growth, profitability, and cash flow in the short term.
Despite Owens & Minor’s shift to a pure-play Patient Direct platform, which is expected to offer better growth and margins in the long run, there are significant execution risks. The core Patient Direct growth trends have slowed, and while new partnerships like the one with Optum could potentially accelerate growth, the durable medical equipment market faces pressures such as competitive bidding and reimbursement issues. Consequently, Allen Lutz has maintained an Underperform rating with a price objective of $4.70, reflecting lower visibility and adjusted revenue and EBITDA estimates for FY25 and FY26.