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Owens & Minor Misses Consensus Estimate

The sale of a part of the medical equipment company's direct-to-consumer business caused earnings to fall drastically in the first quarter.

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Owens & Minor


announced on April 20, 2009 that its Q1 FY09 earnings fell 42.3%, hurt by the sale of its direct-to-consumer (DTC) diabetes supply business. Net income decreased to $13.98 million, or $0.34 per share, from $24.21 million, or $0.59 per share, in the prior year's quarter. Income from continuing operations decreased 7.0% to $22.36 million, or $0.54 per share, missing the most recent consensus estimate of $0.60 per share.

Revenue increased 12.8% to $1.95 billion from $1.73 billion in Q1 FY08. Cost of revenue advanced 13.4% to $1.76 billion from $1.56 billion. The gross margin improved 7.9% to $183.63 million from $170.21 million. Selling, general, and administrative expenses increased 13.3% to $139.40 million from $122.99 million. However, depreciation and amortization expenses fell 10.1% to $5.82 million from $5.28 million. Operating earnings decreased 7.2% to $39.88 million from $42.96 million. Days sales outstanding were 23.6 days compared to 22.6 days in Q1 FY08. Inventory turnover was 10.3 compared to 10.6 in the prior year's quarter. Cash from operating activities deteriorated 27.4% to $83.10 million from $114.39 million in the prior year's quarter.

During Q1 FY09, OMI completed the sale of certain assets of its DTC business. For Q1 FY09, Owens & Minor paid cash dividend of $0.23 per share, which is an increase of 15.0% over the prior quarter's dividend. Furthermore, the company won a prime vendor contract for medical and surgical supplies worth $100.00 million firm fixed price.

Looking forward, Owens & Minor reaffirmed its fiscal 2009 guidance and expects revenue growth in a range of 8.0% to 12.0% and income per diluted share from continuing operations in a range of $2.55 to $2.70.