Please ensure Javascript is enabled for purposes of website accessibility

What's Behind Owens & Minor's Dismal Q4 Update

By Keith Speights - Mar 4, 2020 at 2:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The global healthcare solutions company's revenue sank in the fourth quarter. And its 2020 outlook isn't encouraging.

Owens & Minor (OMI 1.21%) got off to a great start in 2020, with its shares soaring more than 30% as of earlier this week. But that momentum has now come to a screeching halt.

The global healthcare solutions company announced its 2019 fourth-quarter and full-year results before the market opened on Wednesday. Investors clearly weren't happy, with the stock plunging 17% by midday. Here are the highlights from Owens & Minor's Q4 update.

Surgeons and nurses performing a surgery

Image source: Getty Images.

By the numbers

The top line went in the wrong direction in the fourth quarter. Revenue fell 10% year over year to $2.19 billion; analysts had been expecting that the company's revenue for the fourth quarter would be $2.48 billion.

The company reported a net loss in Q4 of $39 million, or $0.65 per share, based on generally accepted accounting principles (GAAP). This reflected improvement from the GAAP net loss of $262 million, or $4.37 per share, posted in the prior-year period.

Owens & Minor announced adjusted net income in the fourth quarter of $14.7 million, or $0.24 per share. This was higher than the company's adjusted earnings of $5.3 million, or $0.09 per share, recorded in the same quarter of 2018. It also narrowly beat the average analyst earnings estimate of $0.23 per share.

Behind the numbers

The company's global solutions segment generated revenue of $1.94 billion in the fourth quarter, down 12% from the prior-year period. Its global products segment's revenue totaled $363.2 million in the fourth quarter, a slight dip from $360.5 million reported in the prior-year period.

Owens & Minor's GAAP bottom line looked much better than it did in Q4 2018, but there was a catch. The company recorded goodwill and intangible-asset impairment charges of $248.5 million in the prior-year period, causing a huge net loss a year ago.

Those charges were factored out of the company's adjusted earnings numbers. Non-GAAP earnings in the fourth quarter of 2019 were boosted by adjustments related to discontinued operations and software-as-a-service implementation costs.

Looking ahead

CEO Edward A. Pesicka thinks the company's pending sale of Movianto and its lower debt load will allow it to invest more in its core businesses. "We believe these investments will continue to drive long-term profitable growth generating consistent annual double-digit earnings growth beyond 2020," Pesicka said.

That double-digit earnings growth won't begin this year, though. The company expects adjusted net income in full-year 2020 between $0.50 and $0.60 per share. The midpoint of this range reflects a small year-over-year decline.

Some healthcare stocks could benefit from the coronavirus outbreak. Owens & Minor is in that group since it makes products for infection prevention. But with a lot of uncertainty for the company over the near term, shares could remain highly volatile.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Owens & Minor, Inc. Stock Quote
Owens & Minor, Inc.
OMI
$33.37 (1.21%) $0.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.