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Solventum Corporation (SOLV - Free Report) reported adjusted earnings per share (EPS) of $1.56 for the second quarter of 2024, which beat the Zacks Consensus Estimate of $1.46 per share by 6.9%. However, the metric declined 36% year over year.
GAAP EPS for the quarter was 51 cents compared with $1.86 in the year-ago period.
Revenues in Detail
Solventum registered revenues of $2.08 billion for the second quarter, up 0.2% year over year, with organic sales increasing 1.3%. The figure beat the Zacks Consensus Estimate by 1.4%.
Reported and organic sales growth reflected the expected normalizing of pricing. Volumes grew slightly and included a benefit from a back-order improvement.
Segmental Details
Solventum derives revenues from the following segments — Medsurg, Health InformationSystems, Dental Solutions, and Purification and Filtration.
Medsurg’s revenues in the reported quarter totaled $1.16 billion, up 0.1% from the year-ago period on a reported basis and 1.8% organically.
Health Information System’s revenues for the reported quarter were $328 million, up 3.5% from the year-ago period, with growth of 3.6% in organic sales.
Dental Solutions generated revenues of $331 million, down 5.8% from the year-ago period, with sales declining 2% organically. Purification and Filtration revenues for the reported quarter were $238 million, down 3.6% from the year-ago period,with organic sales declining 0.9%.
Margins
For the quarter under review, Solventum’s gross profit fell 4.4% from the year-ago period to $1.14 billion. The gross margin contracted 260 basis points to 54.6%.
Research and development expenses decreased 0.5% year over year to $192 million. General and administrative expenses increased 21.1% to $701 million. Operating expenses of $1.84 billion increased 10.7% year over year.
Operating income totaled $244 million compared with $417 million in the year-ago quarter. The operating margin contracted 840 basis points to 11.7%.
Financial Position
Solventum exited the second quarter of 2024 with cash and cash equivalents of $897 million compared with $996 million at the end of the first quarter of 2024.
Net cash provided by operating activities at the end of the second quarter of 2024 was $797 million compared with $875 million a year ago.
Guidance
Solventum raised its full-year outlook.
The company now expects sales to be flat to up 2% organically compared with the prior guidance of flat to down 2%. The company expects adjusted EPS in the range of $6.30-$6.50, up from the prior guidance of $6.10-$6.40. The Zacks Consensus Estimate is pegged at $6.40 per share.
Our Take
Solventum’s second-quarter 2024 results were better than expected. The company's EPS, however, decreased from the year-ago period. GAAP earnings also declined year over year. Revenues saw a slight increase year over year, driven by growth in the MedSurg and Health Information Systems segments.
Bryan Hanson, CEO of Solventum, expressed optimism about the company's early success as an independent entity despite ongoing transformation efforts. He highlighted that the company is building on a strong foundation and is focused on addressing past underperformance to unlock long-term value. As part of its efforts, Solventum has identified 3,500 SKUs for elimination in the first wave of a larger project, aiming to simplify the supply chain without significantly impacting revenues or margins in 2024.
The second wave of this initiative will be more impactful in 2025, targeting further margin improvements. The company is committed to enhancing efficiency through the "Solventum Way" and SKU projects, which will help reinvest in the business and improve margins over time. While operating margins have seen a temporary decline due to various factors, Solventum remains focused on repositioning for growth and delivering long-term value.
However, the decline in Dental Solutions and Purification and Filtration is concerning. The contraction of gross and operating margins also does not bode well.
Solventum Corporation Price, Consensus and EPS Surprise
Currently, Solventum carries a Zacks Rank #3 (Hold).
Some top-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Services has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% increase.
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Solventum's (SOLV) Q2 Earnings Beat Estimates, ' 24 View Raised
Solventum Corporation (SOLV - Free Report) reported adjusted earnings per share (EPS) of $1.56 for the second quarter of 2024, which beat the Zacks Consensus Estimate of $1.46 per share by 6.9%. However, the metric declined 36% year over year.
GAAP EPS for the quarter was 51 cents compared with $1.86 in the year-ago period.
Revenues in Detail
Solventum registered revenues of $2.08 billion for the second quarter, up 0.2% year over year, with organic sales increasing 1.3%. The figure beat the Zacks Consensus Estimate by 1.4%.
Reported and organic sales growth reflected the expected normalizing of pricing. Volumes grew slightly and included a benefit from a back-order improvement.
Segmental Details
Solventum derives revenues from the following segments — Medsurg, Health InformationSystems, Dental Solutions, and Purification and Filtration.
Medsurg’s revenues in the reported quarter totaled $1.16 billion, up 0.1% from the year-ago period on a reported basis and 1.8% organically.
Health Information System’s revenues for the reported quarter were $328 million, up 3.5% from the year-ago period, with growth of 3.6% in organic sales.
Dental Solutions generated revenues of $331 million, down 5.8% from the year-ago period, with sales declining 2% organically. Purification and Filtration revenues for the reported quarter were $238 million, down 3.6% from the year-ago period,with organic sales declining 0.9%.
Margins
For the quarter under review, Solventum’s gross profit fell 4.4% from the year-ago period to $1.14 billion. The gross margin contracted 260 basis points to 54.6%.
Research and development expenses decreased 0.5% year over year to $192 million. General and administrative expenses increased 21.1% to $701 million. Operating expenses of $1.84 billion increased 10.7% year over year.
Operating income totaled $244 million compared with $417 million in the year-ago quarter. The operating margin contracted 840 basis points to 11.7%.
Financial Position
Solventum exited the second quarter of 2024 with cash and cash equivalents of $897 million compared with $996 million at the end of the first quarter of 2024.
Net cash provided by operating activities at the end of the second quarter of 2024 was $797 million compared with $875 million a year ago.
Guidance
Solventum raised its full-year outlook.
The company now expects sales to be flat to up 2% organically compared with the prior guidance of flat to down 2%. The company expects adjusted EPS in the range of $6.30-$6.50, up from the prior guidance of $6.10-$6.40. The Zacks Consensus Estimate is pegged at $6.40 per share.
Our Take
Solventum’s second-quarter 2024 results were better than expected. The company's EPS, however, decreased from the year-ago period. GAAP earnings also declined year over year. Revenues saw a slight increase year over year, driven by growth in the MedSurg and Health Information Systems segments.
Bryan Hanson, CEO of Solventum, expressed optimism about the company's early success as an independent entity despite ongoing transformation efforts. He highlighted that the company is building on a strong foundation and is focused on addressing past underperformance to unlock long-term value. As part of its efforts, Solventum has identified 3,500 SKUs for elimination in the first wave of a larger project, aiming to simplify the supply chain without significantly impacting revenues or margins in 2024.
The second wave of this initiative will be more impactful in 2025, targeting further margin improvements. The company is committed to enhancing efficiency through the "Solventum Way" and SKU projects, which will help reinvest in the business and improve margins over time. While operating margins have seen a temporary decline due to various factors, Solventum remains focused on repositioning for growth and delivering long-term value.
However, the decline in Dental Solutions and Purification and Filtration is concerning. The contraction of gross and operating margins also does not bode well.
Solventum Corporation Price, Consensus and EPS Surprise
Solventum Corporation price-consensus-eps-surprise-chart | Solventum Corporation Quote
Zacks Rank & Key Picks
Currently, Solventum carries a Zacks Rank #3 (Hold).
Some top-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Services has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% increase.