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Why Owens & Minor Stock Just Popped 8%

By Rich Smith – Aug 11, 2020 at 3:57PM

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Many investors don't know what to make of Owens & Minor. One analyst thinks this makes the stock a "buy."

What happened

Shares of medical personal protective equipment (PPE) manufacturer Owens & Minor (OMI -0.45%) are up a strong 7.6% in 3:15 p.m. EDT trading today, boosted by a big vote of confidence from the analysts at Baird.

In a note today, investment bank R.W. Baird named Owens & Minor stock a "Fresh Pick" and advised investors to take advantage of the "unusual opportunity" to pick up shares on the cheap, offered by the shares' recent "volatility," reports TheFly.com.

N95 masks and coronaviruses on a red background.

Image source: Getty Images.

So what

What is this volatility of which R.W. Baird speaks? Well, consider that over just the past two days, Owens & Minor shares have gained more than 15%. But over the four days preceding these past two days, the stock lost 25% -- after earnings came out showing Owens & Minor's revenues falling 25% and generally accepted accounting principles (GAAP) earnings barely making it to breakeven.

For a company that's been making headlines for months on end for its role in providing front-line medical workers with gowns, gloves, facemasks, and N95 respirators, the inability to earn a GAAP profit must have come as a disappointment. Granted, there's a fair amount of competition in this space, from makers of Chinese "KN95" N95 knockoffs to private manufacturers of respirators, like Canada's O2 Industries (which makes a superior "Curve" respirator), to the giant of N95 manufacturing, 3M (MMM 0.81%). But even so, the deficit of N95s and other PPE lasted so long and was so highly publicized that investors could be forgiven for thinking earnings might have been at least a little better than breakeven.

Now what

Regardless, Baird remains optimistic that Owens & Minor can do better going forward, arguing the company has a "PPE destiny" to fulfill in the era of COVID-19 -- that this is Owens & Minor's market to lose.

In that regard, Owens & Minor tends to agree. Last week's earnings report saw the company double its guidance for full-year pro forma earnings (at least) to a range of from $1 to $1.20 per share, and management is forecasting "double digit" earnings growth in 2021.

If management can fulfill these promises and turn Owens & Minor into perhaps a 12.3 price-to-earnings (P/E) stock, growing even in just the mid-teens, I'll be inclined to agree, too .

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends 3M. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Owens & Minor Stock Quote
Owens & Minor
OMI
$19.84 (-0.45%) $0.09
3M Stock Quote
3M
MMM
$129.04 (0.81%) $1.04

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