Medical supply and logistics company Owens & Minor (NYSE: OMI) fell short of the market’s revenue expectations in Q1 CY2025, with sales flat year on year at $2.63 billion. Its non-GAAP EPS of $0.23 per share was 14.5% above analysts’ consensus estimates.

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StockStory’s Take

Owens & Minor’s first quarter results reflected contrasting dynamics across its business segments. Management emphasized the Patient Direct division’s mid-single-digit revenue growth and a 31% jump in operating income, highlighting investments in sleep therapy and expanded commercial resources as key contributors. CEO Ed Pesicka pointed to “meaningful increase in our sleep starts and high single-digit revenue growth in our sleep supplies for the first quarter” as evidence that streamlining processes and broadening the sales portfolio yielded tangible benefits. Meanwhile, the Products and Healthcare Services segment faced ongoing challenges, with management acknowledging that lower glove prices and reduced international sales weighed on performance, partially offset by growth in proprietary products and new distribution centers.

Looking ahead, Owens & Minor’s guidance remains anchored by tariff exposure, ongoing pricing actions, and the pending acquisition of Rotech. Pesicka clarified that tariff costs—estimated between $100 million and $150 million—will be passed through to customers via targeted price increases, effective in June. “We can no longer absorb these costs,” he stated, describing a strategy focused on SKU-specific adjustments rather than broad price hikes. CFO Jon Leon reiterated expectations for improved earnings and cash flow in the second half of the year, assuming successful execution of cost mitigation measures and timely customer acceptance of new pricing. Management also flagged the need to address potential short-term working capital impacts as tariffs are paid ahead of receivables collection.

Key Insights from Management’s Remarks

Management attributed strong Patient Direct results to operational investments, while tariff exposure and competitive pricing shaped the outlook for Products and Healthcare Services.

• Patient Direct segment expansion: The Patient Direct division saw mid-single-digit revenue growth and a significant improvement in segment operating income, attributed to enhanced sales processes, investments in the sleep therapy category, and targeted expansion into wound, ostomy, and urology supplies. Management highlighted that “double-digit growth” was achieved in several therapy categories due to a streamlined sales approach and expanded product offerings.

• Sleep therapy momentum: The company’s focus on optimizing the “sleep journey” for patients—making it easier to initiate and reorder therapy—translated into higher adherence and increased supply sales. CEO Ed Pesicka cited substantial growth in sleep-related revenue, demonstrating the value of operational enhancements in this area.

• Revenue cycle management improvements: Owens & Minor invested in its revenue cycle management, initially within the Byram division, leading to record collection rates in the first quarter. These process improvements are now being rolled out to the Apria division, with management expecting further progress through the year.

• Distribution network automation: The company opened new, automated distribution centers in West Virginia and South Dakota, designed to drive long-term efficiencies and support customers in those regions. These facilities were described as “state-of-the-art,” reflecting an ongoing commitment to logistics modernization despite near-term costs.

• Tariff impact and pricing strategy: Management detailed the challenges posed by new and existing tariffs—especially on products sourced from China and Thailand. Owens & Minor is implementing SKU-level price increases in the Products and Healthcare Services segment (rather than blending tariffs across all products) and is leveraging its U.S. manufacturing and multi-country sourcing to offer alternatives where possible. The company expects to pass through $100 million to $150 million in additional costs to customers.

Drivers of Future Performance

Owens & Minor’s outlook is shaped by its ability to offset tariff headwinds, execute pricing changes, and close the Rotech acquisition.

• Tariff pass-through execution: Management is focused on implementing targeted price increases for products affected by tariffs, starting in June. The company’s approach is to apply increases only to impacted SKUs, aiming to protect gross profit dollars while working to minimize customer disruption. Management acknowledged the risk that some competitors may not fully pass on tariff costs, potentially leading to share shifts or customer pushback.

• Rotech acquisition integration: The pending acquisition of Rotech is expected to be neutral to earnings in its first year and accretive thereafter, pending regulatory approval and finalization of financing. Management confirmed that Rotech’s recent performance aligns with deal expectations, but highlighted that higher-than-anticipated debt costs could affect future accretion, with updates to be provided upon deal closure.

• Working capital and cash flow management: Owens & Minor expects free cash flow to strengthen over the year, driven by seasonal profit growth and improvements in collection rates. Management cautioned that working capital could be temporarily impacted by the timing of tariff payments relative to accounts receivable, but reiterated plans to use cash flow for debt reduction and maintaining leverage targets.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will monitor (1) the effectiveness and customer acceptance of tariff-related price increases in Products and Healthcare Services, (2) the closing and integration progress of the Rotech acquisition, and (3) ongoing improvements in Patient Direct’s revenue cycle management and collection rates. We will also track how Owens & Minor navigates competitor pricing responses and manages working capital amid these operational shifts.

Owens & Minor currently trades at a forward P/E ratio of 3.7×. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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