CTAs keep buying Treasuries, gold longs face stop-loss risk: BofA
Embecta Corp (NASDAQ:EMBC) shares surged over 15% on Thursday after the diabetes care company reported strong third-quarter fiscal 2025 results, with revenue growth across all product categories and geographies. The company also raised its full-year guidance, signaling confidence in its strategic initiatives and operational execution.
Introduction & Market Context
Embecta delivered Q3 FY 2025 results that exceeded internal expectations, with revenue reaching $295.5 million, up 8.4% on a reported basis compared to the same period last year. The strong performance marks a significant turnaround from the 9.8% revenue decline reported in Q2 FY 2025, helping drive the stock up nearly 16% in regular trading, with an additional 27.4% gain in pre-market activity.
"We delivered strong results, ahead of internal expectations, reflecting solid commercial execution aided in part by timing of customer orders," the company noted in its presentation, while acknowledging the "increasingly complex and dynamic geopolitical environment" in which it operates.
Quarterly Performance Highlights
Embecta reported robust financial metrics across the board for the third quarter of fiscal 2025. Revenue growth was broad-based across all product categories and geographies, with particularly strong performance in the U.S. market.
As shown in the following breakdown of quarterly revenue:
Total (EPA:TTEF) revenue reached $295.5 million, representing 8.4% reported growth and 8.0% adjusted constant currency growth compared to Q3 FY 2024. U.S. revenue grew 11.6% to $160.2 million, while international revenue increased 5.0% to $135.3 million. By product category, pen needles (the company’s largest segment) grew 7.7% to $216.9 million, syringes increased 10.7% to $35.1 million, and safety products rose 7.4% to $34.8 million.
The company’s profitability metrics also showed significant improvement, as highlighted in this financial summary:
Adjusted gross profit reached $198.6 million with a margin of 67.2%, compared to $190.3 million and 69.8% in the prior year period. While gross margin declined slightly year-over-year, adjusted operating income increased substantially to $109.1 million with a margin of 36.9%, up from $83.3 million and 30.6% in Q3 FY 2024.
Adjusted net income rose to $65.5 million ($1.12 per diluted share), compared to $43.0 million ($0.74 per share) in the prior year period, representing a 51% increase in adjusted EPS. Adjusted EBITDA reached $131.0 million with a margin of 44.3%, compared to $99.2 million and 36.4% in the prior year period.
Strategic Initiatives
Embecta highlighted significant progress on several strategic priorities during the quarter. The company completed its global ERP, shared services, and distribution transition in India, while advancing the U.S. and Canada brand transition from BD to Embecta branding, which remains on track for substantial completion by the end of FY 2025.
The brand transition plan is visualized in the following slide:
The company is also positioning itself to capitalize on the growing GLP-1 market, signing multiple contracts and receiving purchase orders to co-package pen needles with potential generic GLP-1 drugs. Additionally, Embecta reported continued progress on expanding appropriately sized GLP-1 retail packaging for weekly injections.
On the operational front, the company substantially completed its restructuring plan, which is expected to generate pre-tax cost savings of between $7 and $8 million during the second half of FY 2025. Financial discipline remained a priority, with the company paying down approximately $52 million of term loan B during the third quarter, bringing year-to-date debt reduction to approximately $112 million.
Updated Financial Guidance
Based on strong year-to-date performance and outlook for the remainder of the year, Embecta tightened and raised its FY 2025 guidance for key financial metrics, as shown in the following comparison:
The company now expects reported revenue between $1,078 million and $1,085 million, representing a reported decline of 3.4% to 4.0%, an improvement from the previous guidance of a 2.9% to 4.4% decline. On an adjusted constant currency basis, the revenue decline is expected to be 3.0% to 3.6%, better than the previous 2.5% to 4.0% projection.
More significantly, Embecta raised its adjusted earnings per diluted share guidance to $2.90-$2.95, up from the previous range of $2.70-$2.90. The company also increased its adjusted operating margin guidance to 30.75%-31.00%, up from 29.75%-30.75%, and its adjusted EBITDA margin guidance to 37.25%-37.50%, up from 36.25%-37.25%.
Detailed Financial Analysis
Looking at the nine-month performance, Embecta’s revenue declined 2.5% on a reported basis and 1.7% on an adjusted constant currency basis compared to the same period in FY 2024. This indicates that the strong Q3 performance has helped offset weaker results earlier in the fiscal year.
The nine-month revenue breakdown provides additional context:
For the nine months ended June 30, 2025, total revenue was $816.4 million compared to $837.0 million in the same period of FY 2024. U.S. revenue declined slightly to $437.1 million from $439.8 million, while international revenue showed a more significant drop to $379.3 million from $397.2 million. Pen needles, the company’s largest product category, declined to $596.3 million from $629.3 million in the prior year period.
Despite the year-to-date revenue decline, Embecta’s profitability metrics for the nine-month period showed improvement, with adjusted operating income of $271.0 million (33.2% margin) compared to $255.0 million (30.5% margin) in the prior year period. Adjusted EBITDA for the nine months reached $325.4 million with a margin of 39.9%, up from $305.3 million and 36.5% in the prior year period.
The company’s supplemental reconciliation for Q3 FY 2025 provides additional insight into its financial performance:
This reconciliation shows how various adjustments, particularly related to the discontinued patch pump program and other non-GAAP adjustments, impact the company’s financial metrics. After these adjustments, operating income increased from $94.0 million on a GAAP basis to $109.1 million on an adjusted basis.
The market’s positive reaction to Embecta’s Q3 results and raised guidance suggests investors are encouraged by the company’s ability to deliver growth despite challenging market conditions. With continued progress on strategic initiatives, improved profitability metrics, and disciplined financial management, Embecta appears well-positioned to maintain momentum through the remainder of fiscal 2025.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.