Owens & Minor Raised to Buy - Analyst Blog

On Apr 15, Zacks Investment Research upgraded Owens & Minor Inc. OMI to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

OMI has been witnessing rising earnings estimates on the back of strong fourth-quarter and full-year 2013 results and an enhanced guidance for fiscal 2014. Moreover, this Virginia-based healthcare logistics company has delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 0.9%. The long-term expected earnings growth rate for this stock is 9%.   

OMI reported fourth-quarter and full-year 2013 results on Feb 10. Adjusted earnings per share came in at 52 cents for the quarter, beating the Zacks Consensus Estimate of 51 cents by 2.0% and exceeding the prior-year earnings by 26%.

Earnings were primarily aided by year-over-year top-line improvement of 1.1%, which was primarily driven by 8.6% growth in the company's international business resulting from quarterly revenues of $105 million contributed by Movianto. A second consecutive quarter of modest growth in OMI's domestic business induced the quarter-over-quarter improvement in the company's consolidated revenues.  

On a quarterly basis, OMI's consolidated gross margin improved on the back of combined growth in both international and domestic business segments. Further, the company's strategic initiatives, including the fee-for-service business, contributed to improved gross margin in the domestic segment.

Based on its progress, OMI reiterated its adjusted earnings per share projection for 2014 in the range 0f $1.95-$2.05. Management also expects net revenues to increase 2% in 2014.

The Zacks Consensus Estimate for earnings for 2014 remained flat at $2.00 over the last 60 days, with one upward estimate revision. Likewise, for 2015, one estimate was revised upward and one revised downward over the same time frame, thereby keeping the Zacks Consensus Estimate unchanged at $2.16.

Other Stocks to Consider

In the medical products space, Enzymotec Ltd. ENZY, Covidien plc COV and William Demant Holding A/S (WILYY) are performing well. While Enzymotec holds a Zacks Rank #1 (Strong Buy), Covidien and William Demant retain a Zacks Rank #2 (Buy).