What happened
Shares of healthcare logistics company Owens & Minor(NYSE: OMI) dropped 32.4% this past week, according to data from S&P Global Intelligence.
So what
The company downgraded its full-year guidance on Wednesday, dropping its 2022 earnings per share (EPS) estimate to between $2.50 and $2.60, down from previous guidance of between $2.85 and $3.15. It also lowered its projection for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to fall between $527 million and $537 million, down from earlier forecasts of 570 million to $610 million.
Owens & Minor operates in two segments, products and healthcare services, and patient direct. The first distributes medical and surgical supplies to acute-care facilities. The second segment operates a direct-to-consumer segment that supplies testing and monitoring supplies to diabetes patients. The culprit for the lowered guidance was the products and healthcare services segment because its clients have elevated inventory levels and lower-than-expected procedure volume.
That might not have been the only news that worried the healthcare company's investors. It also announced leadership changes, appointing a new CEO, Andrew G. Long, who had been the company's chief financial officer (CFO). Long is replacing Jeffrey T. Jochims. who is leaving the company. Owens & Minor also promoted Alexander J. Bruni to CFO.
Now what
Investors were perhaps surprised by the abruptness of the announcement and might have wished for more clarity from the company as to what it intends to do to rectify the business situation. Owens & Minor in its second-quarter report hadn't given much of an indication of slowed sales. Through six months, the company reported revenue of $4.9 billion, up 1.8%, though six month earnings per share was listed at $0.89, down from $1.80 in the first six months of 2021.
There may also be concerns that the company's $1.8 billion acquisition of home healthcare company Aphria, completed in March, may have added too much debt to Owens & Minor's balance sheet.
The sudden drop in stock price could have been a bit of an overreaction as it bounced back a bit on Friday, closing the week at $15.49. The company still provides a potential bargain as it is trading at only slightly seven times annual earnings.
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Jim Halley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
