Benchmark analyst Bill Sutherland reiterated a Buy rating on Premier, Inc (NASDAQ:PINC), lowering the price target to $32 from $37.

The company recently reported Q4 results, where GAAP net revenue of $340.4 million was flat, impacted by a decline in direct sourcing product revenue.

Following the results, the analyst now models AEBITDA to be down 7% in FY24 versus the prior model, which had 6% growth. 

The analyst thinks that the key swing factor is management's expectation that GPO net admin fee share with providers is expected to rise this year from the low-50% level to the upper 50% range based on renegotiated contracts (including the Advocate Health merger). 

The analyst notes that this loss of fee share is expected to more than offset the outlook of mid-single-digit growth in gross admin fee revenue, as well as the expected high-single-digit increase for Performance Services.

Sutherland adds that the upcoming renegotiation period for the large number of 5-7-year GPO contracts signed in 2020 is likely to lead to another uptick in fee share, potentially to the mid-60% range.

Following the Q4 results, the analyst expects FY24 revenue of $1.37 billion ($1.45 billion prior), up 2%. 

The analyst expects FY25 revenues of $1.425 billion, up 4% y/y, with Supply Chain revenue up 3%.

For FY25, the analyst expects AEBITDA of $467.6 million, up fractionally, with Supply Chain down fractionally with a full year of higher fee share resulting in a margin of 49%, down 150 bps y/y, and Performance Svcs up 7% with a steady margin. 

Price Action: PINC shares are trading lower by 8.98% to $21.89 on the last check Wednesday.