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On Thursday, BNP Paribas (OTC:BNPQY) Exane adjusted its outlook on Organon & Co. (NYSE:OGN), reducing the price target to $16 from the previous $29, while retaining an Outperform rating on the stock. The revision follows a recent meeting with Organon’s management, which took place after the company reported first-quarter earnings for 2025 that surpassed expectations. Despite the positive performance, Organon announced a cut to its dividend, a decision that was larger than analysts had anticipated.
The management of Organon justified the dividend reduction as a strategic move to accelerate the process of deleveraging, considering the high dividend payouts in the past. The dividend yield now stands at 0.95%, following a significant 92.86% reduction. BNP Paribas Exane acknowledged the rationale behind this adjustment, although the extent of the dividend cut was not expected. The firm’s analysts believe that the lowered dividend is part of a broader capital allocation strategy overhaul, with the company maintaining a healthy gross profit margin of 57.18%.
Despite the reduction in the price target and dividend cut, BNP Paribas Exane’s stance on Organon remains positive. The analysts underscored the company’s focus on the women’s health sector, which they see as an underserved market with significant potential. With a remarkably low P/E ratio of 2.89 and projected earnings per share of $3.89 for FY2025, Organon’s commitment to this area, along with its potential for strategic tuck-in business developments (BDs), underpins the Outperform rating. InvestingPro subscribers can access detailed financial health metrics and additional insights about Organon’s growth potential.
The firm expressed a preference for deals similar to Organon’s agreement with Eli Lilly (NYSE:LLY) regarding the migraine medication Emgality, which involves low upfront payments. Additionally, the successful launch of VTAMA for atopic dermatitis (AD) was noted as an encouraging sign for the company’s future prospects.
BNP Paribas Exane’s analysts concluded their commentary by emphasizing Organon’s attractiveness as an investment, particularly in light of its strategic moves in women’s health and its potential for value-adding business deals.
In other recent news, Organon & Co reported mixed financial results for the first quarter of 2025. The company exceeded earnings per share (EPS) expectations with a reported EPS of $1.02, surpassing the forecast of $0.91. However, revenue fell short, coming in at $1.51 billion against the expected $1.55 billion. Despite the revenue miss, Organon maintained its revenue guidance for the year, anticipating flat year-over-year results at the midpoint. The company is also focusing on restructuring initiatives aimed at achieving $200 million in annual savings.
Organon has announced that Nexplanon is expected to generate over $1 billion in sales for 2025, with the product showing double-digit growth. Additionally, the company plans to reduce its net leverage ratio below 4x by the end of the year, redirecting funds from a reset dividend payout to debt reduction. In terms of analyst opinions, there were no specific upgrades or downgrades mentioned. Organon is also dealing with competitive pressures in the women’s health and biosimilars markets, which remain a challenge for the company.
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