Home-based Care Expansion Will Drive Secular Growth

Key Takeaways

• Leadership in home-based care and high-growth medical categories positions Owens & Minor for strong, recurring revenue and margin gains.
  
• Investments in automation, IT, and focused M&A enhance operating leverage, supporting faster cash flow growth and increased long-term contract wins.
  
• Reliance on a single business line, high debt costs, and shifts in care channels heighten Owens & Minor's risk to revenue declines, margin pressure, and operational inefficiency.

Catalysts

Operates as a healthcare solutions company worldwide.

• While analyst consensus expects the Patient Direct shift to drive sustainable revenue growth from demographic trends, the scale Owens & Minor already has-growing Patient Direct from $450 million to over $2.8 billion in eight years-positions it to capture an even greater share as home-based care rapidly expands, meaning industry outperformance could drive revenue and EBITDA well beyond current estimates.
  
• Analysts broadly agree that margin expansion will come from IT, automation, and revenue cycle investments, but the accelerating improvement in both collection rates and working capital productivity already seen suggests the company could realize operating leverage and free cash flow improvements far faster and more substantially than the market currently models.
  
• Owens & Minor is uniquely positioned to benefit from industry consolidation among health systems, as larger purchasing groups increasingly favor national partners with end-to-end supply capability-this could trigger step-change gains in long-term contract wins and retention, supporting multi-year visibility for top-line and earnings growth.
  
• With the increasing prevalence of chronic diseases and a market shift to at-home care, Owens & Minor's leadership in high-growth categories like sleep, ostomy, and urology-each showing double-digit growth-could see recurring revenues and gross margins accelerate as these high-margin therapies claim a greater share of the overall healthcare spend.
  
• The company's focused post-divestiture balance sheet and aggressive debt paydown unlock substantial M&A firepower, and by redeploying proceeds into targeted bolt-on deals in fragmented niches, Owens & Minor can rapidly augment both scale and category breadth-driving EBITDA expansion and potential step changes in net profit.

Owens & Minor Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Owens & Minor compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Owens & Minor's revenue will decrease by 41.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -4.0% today to 0.4% in 3 years time.
• The bullish analysts expect earnings to reach $9.5 million (and earnings per share of $1.24) by about August 2028, up from $-430.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 80.6x on those 2028 earnings, up from -0.9x today. This future PE is greater than the current PE for the US Healthcare industry at 21.5x.
• Analysts expect the number of shares outstanding to grow by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Owens & Minor Future Earnings Per Share Growth

Risks

• The divestiture of the Products & Healthcare Services segment exposes Owens & Minor to an overreliance on its Patient Direct business, increasing risk from lack of diversification, which could amplify the impact of sector-specific disruptions on future revenue and operating margins.
  
• Persistently high leverage and significant interest costs, even after planned debt paydown, could restrict Owens & Minor's ability to invest in innovation, digital infrastructure, and technology upgrades, hindering long-term earnings growth and net margin expansion.
  
• Owens & Minor's stated priority to reduce stranded costs following the divestiture may take longer than anticipated and could result in permanent operational inefficiencies, thereby pressuring profitability and diminishing free cash flow in the medium term.
  
• Shifts from durable medical equipment (DME) to pharmacy channels in diabetes care could lead to lower top-line growth, and increased exposure to competitive bidding or pricing pressures in the sector may further compress revenue and gross margins in the coming years.
  
• The company remains vulnerable to client concentration, highlighted by the impending loss of the Kaiser contract and the need to redeploy assets and capture new business; abrupt losses or renegotiations with major customers may trigger sudden declines in revenue and threaten future earnings stability.

Valuation

• The assumed bullish price target for Owens & Minor is $7.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Owens & Minor's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $4.7.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $9.5 million, and it would be trading on a PE ratio of 80.6x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $4.9, the bullish analyst price target of $7.0 is 30.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.