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On Thursday, BofA Securities analyst Travis Steed reduced the price target on Embecta shares (NASDAQ:EMBC) to $18.00, down from the previous $20.00, while maintaining an Underperform rating on the company. The stock, currently trading at $10.55, has fallen nearly 48% over the past six months and is trading near its 52-week low. According to InvestingPro analysis, the company appears undervalued based on its Fair Value metrics. Steed noted that Embecta’s fiscal second-quarter revenue of $259 million slightly exceeded the Street’s expectation of $254 million. This was attributed to less severe foreign exchange headwinds than anticipated. InvestingPro data shows the company maintains a healthy gross profit margin of 64% and offers a significant dividend yield of 5.69%, making it an interesting option for income-focused investors. InvestingPro subscribers have access to 8 more exclusive tips about Embecta’s financial outlook.
Embecta experienced a revenue decline of 7.7% in constant currency terms during the quarter, which was in line with expectations. The decline was primarily due to customers purchasing products in advance of a price hike that was implemented on January 1, leading to a forward shift in revenue to the first fiscal quarter. Moreover, Embecta highlighted that a major U.S. pharmacy retailer’s decision to close stores would lead to lower inventory levels and consequently affect the company’s revenue in the second half of 2025.
To mitigate these revenue declines, Embecta has expedited cuts in selling, general, and administrative expenses (SG&A) as well as in research and development (R&D). The company has also undertaken a new restructuring plan in the second fiscal quarter, which is expected to realize approximately $3 million in pre-tax cost savings in the latter half of fiscal year 2025 and is slated for completion by the end of that fiscal year. This plan follows the closure of the patch pump program in the fourth fiscal quarter of 2024 as part of Embecta’s ongoing restructuring efforts.
In other recent news, Embecta Corp reported its second-quarter fiscal year 2025 results, surpassing earnings expectations with an earnings per share (EPS) of $0.70, compared to the forecasted $0.53. Despite this positive earnings surprise, the company experienced a 9.8% year-over-year decline in revenue, bringing in $259 million, slightly above the anticipated $253.86 million. Embecta has projected full-year revenue between $1,073 million and $1,090 million, with an adjusted EPS between $2.70 and $2.90. The company continues to face market challenges, including tariff impacts from US-China trade dynamics, estimated at $8-9 million annually. Embecta’s restructuring plan aims to streamline operations, with expected pretax cost savings of $7 to $8 million during the second half of fiscal 2025. The company has received several purchase orders from generic GLP-1 drug manufacturers, marking a strategic milestone in its efforts to expand into the fast-growing market. Embecta’s forward guidance suggests flat to slightly positive revenue growth, supported by ongoing operational restructuring and strategic initiatives.
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