Owens & Minor’s Strategic Setbacks and Financial Challenges Justify Sell Rating

Bank of America Securities analyst Allen Lutz reiterated a Sell rating on Owens & Minor (OMI – Research Report) yesterday and set a price target of $7.50.

Allen Lutz has given his Sell rating due to a combination of factors surrounding Owens & Minor’s recent business decisions and financial outlook. The termination of the merger with Rotech Healthcare, which was expected to enhance earnings, has been a significant setback. The deal’s cancellation, driven by regulatory challenges and potential anti-competitive concerns, has resulted in substantial costs for Owens & Minor, including an $80 million payment to Rotech and an expected total expense of approximately $100 million related to the termination.
Additionally, Owens & Minor faces challenges in its broader turnaround strategy, which requires balancing cost reduction, working capital improvement, and debt reduction while pursuing growth. The company’s commitment to divesting its Products and Healthcare Services business and focusing on the Patient Direct business suggests a strategic shift, but the financial implications of the merger termination and ongoing debt obligations are concerning. As a result, despite a slight increase in the price objective to $7.50, the overall outlook remains cautious, justifying the Sell rating.

In another report released on June 2, J.P. Morgan also maintained a Sell rating on the stock with a $7.00 price target.

Based on the recent corporate insider activity of 43 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of OMI in relation to earlier this year.