Owens & Minor | The 140-Year-Old Healthcare Giant With 4x+ Upside

Owens & Minor is dumping its low-margin business, going lean, and setting up for a massive run investors aren’t ready for.

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The Turnaround Investment Newsletter

Since the start of 2024, my portfolio is up 220.71%.

This year alone, I’m sitting at +73.14% YTD through July.

All earned from setups like this. Mispriced, unloved, and loaded with leverage to a theme no one’s paying attention to yet.

This week’s new idea covers Owens & Minor ($OMI).

The setup?

a left-for-dead healthcare giant making a 180-degree turn back to leaner growth, higher margins, and massive upside.

If you don’t know the name, I’ll walk through it all:

• What they do.

• What management plans.

• Why they are interesting today.

• The risks.

• And why I expect $25+ per share (More than 4x from today’s price of $5.60)

Let’s get into it.

Please note this is NOT a company I own. This is an idea I thought worth sharing.

What Does Owen’s & Minor Do?

Owens & Minor has been reinventing itself for over 140 years.

They started as a small Richmond pharmacy in the late 1800s. Grew into a major pharmaceutical and hospital distributor, and made repeated pivots as healthcare changed. Each management era brought acquisitions, divestitures, and new directions.

That history of change leads us to another major shift today.

Owens & Minor is exiting its legacy Products & Healthcare Services segment. The low-margin hospital supply distribution business that has defined much of its history.

Once complete, the company will be entirely a Patient Direct business. This segment serves nearly 3 million patients in their homes and was built around two large acquisitions:

• Byram Healthcare (2017)

• Apria (2022)

Patient Direct delivers a wide range of products to support patients with chronic conditions, including:

• Diabetes supplies – 27.9% of revenue ($378.4M)

• Sleep apnea therapy devices – 26.8% of revenue ($363.5M)

• Home respiratory therapy –16.1% of revenue ($218.1M)

• Ostomy products – 7.5% of revenue ($101.4M)

• Wound care supplies – 6.6% of revenue ($89.3M)

• Urology products – 4.2% of revenue ($56.9M)

• Other medical equipment and daily-use items – 10.6% of revenue ($144.1M)

As this divestiture occurs, Owens & Minor plans to use 100% of the proceeds to pay down debt with the goal to reduce net debt to EBITDA down to 2–3×. Making the company much leaner and more focused while shedding many of the struggles that have weighed on past performance.

The Patient Direct segment has grown from roughly $450M in revenue in 2017 to an expected ~$2.8B in 2025. Future growth may not match the same pace seen in prior years, but the business will still see meaningful expansion driven from a few key drivers.

Roughly 40% of U.S. adults live with at least one chronic condition, and about 12% have five or more. Five of the top ten causes of death are linked to preventable or treatable chronic diseases. Conditions that often require steady care and supplies at home over many years.

By 2030, one in five Americans will be 65 or older, or about 71 million people. Many will face mobility challenges or health issues that make frequent hospital visits difficult, making home-based care more attractive and necessary.

Healthcare providers and payers are also actively pushing for more care at home. It’s cheaper, often more effective, and frees up hospital capacity.

As CEO Ed Pesicka put it, “The home has become an essential care setting, supporting longer, healthier lives for patients and unlocking greater efficiency.”

These demographic and economic trends create a long runway for Patient Direct. The company’s national scale, payer relationships, and broad product offering position it to capture a growing share of the market for in-home medical supplies and services over the coming years.

I have been watching OMI for a few quarters, and now, things are finally looking up.

Why They Are Interesting

Behind One-Offs, Positive Free Cash Flow

Q2 2025 reported a net loss of -$869 million or more than -$11 per share. But the 75% of that came from a write-down of the discontinued Products & Healthcare Services segment.

Operating cash flow for the quarter was $38 million, and after CAPEX free cash flow came in at -$30M. Looking even deeper I found about $98 million in fees related to the terminated Rotech acquisition. Without those fees, free cash flow would have been approximately $70 million.

This is important to understand that the underlying business despite all the noise performed well. Annualize that FCF and that would mean the company trades at less than 2x FCF.

Stock Is Down 90% Drawdown From Highs

From highs near $50 in 2021, shares had fallen back under $5 at one point just days ago.

Higher Margin Business

Company-wide operating margin in 2024 was roughly 2%, while Patient Direct posted an operating margin of 9.7% and an adjusted EBITDA margin of 14.2% in Q2 2025.

After the divestiture, the company will retain 85% of its 2024 operating profit despite losing about 75% of its revenue, showing how skewed profitability has been toward Patient Direct.

Industry Tailwinds

The long-term demand picture is favorable:

• About 40% of U.S. adults live with at least one chronic condition, and 12% have five or more.

• By 2030, 1 in 5 Americans will be 65 or older, or roughly 71 million people.

• Five of the top 10 causes of death in the U.S. are linked to preventable or treatable chronic diseases.

• Healthcare providers and payers are shifting more care to the home to improve outcomes and lower costs.

Deleveraging The Balance Sheet

Owens & Minor ended Q2 2025 with roughly $1.9 billion in net debt. Management has guided 2025 Patient Direct adjusted EBITDA to $376 million–$382 million.

At their target leverage of 2–3× EBITDA, debt would need to be between $752 million and $1.14 billion. That implies a reduction of $760 million–$1.15 billion from the sale proceeds of the Products & Healthcare Services segment.

After this completes the company will be in a situation almost flipped from today. Leaner more agile business poised for revenue growth and margin expansion.

Historically Solid ROIC and ROCE

Over the last 40 years both ROIC and ROCE have averaged above 10%. This is a company that has endured cycle after cycle coming out stronger on the other side.

(Dark Blue) ROCE, (Light Blue) ROIC

Risks and Questions

Managing Stranded Costs After Divestiture

When the Products and Healthcare Services segment is sold, Owens & Minor will still carry some of the costs tied to running a much larger business.

In Q2 2025, stranded costs were about $11 million. Management has guided that stranded costs will initially rise after the divestiture before being phased down. If these costs are not removed quickly or are larger than expected, FCF will come under pressure.

Acquisition Ambition

Management’s pursuit of the Rotech acquisition, which was blocked, cost the company roughly $100 million in fees. While a stronger balance sheet and cash flow after the divestiture would reduce the impact of another blocked deal, pursuing large acquisitions still carries execution risk and financial cost.

Meaningful Delay In Divestiture

Owens & Minor has $383 million of debt maturing in 2025. A significant delay in the divestiture into 2026 could force the company to refinance under less favorable terms or raise equity.

I do think even with a delay, free cash flow could partially pay this down, and refinancing a few hundred million should be possible, but it would still be a negative outcome.

Lower-Than-Expected Sale Proceeds

The sale price for the Products and Healthcare Services segment will directly affect the company’s post-transaction leverage. If proceeds come in well below expectations, Owens & Minor could be left with materially more debt than planned.

In the event this happens I believe debt maturities are manageable. In the near term $383 million in 2025 (which will almost certainly be covered by even a pitiful divestiture.), $135 million in 2027, then no maturities until 2029. Even with a higher debt load, a couple hundred million in annual free cash flow will allow them to easily reduce leverage before the 2029 wall.

Management Incentives Alignment

I have not yet done the work to understand whether management’s compensation is directly aligned with shareholder interests. In a turnaround, incentives that prioritize cash generation and balance sheet improvement are critical, especially with uncertainty around divestiture timing.

Management Execution

It has been an incredibly rocky ride under the current CEO so execution is a real risk. They need to get back to growth, above WACC returns on capital, and have sights on margin expansion.

If they cannot do this upside could be far more limited.

Valuation

Starting with Owens & Minor’s midpoint 2025 revenue guidance for Patient Direct of $2.79 billion here is my projection through the end of 2027.

4% annual revenue growth in both 2026 and 2027:

• 2026 revenue = $2.90 billion

• 2027 revenue = $3.02 billion

Then through cost cutting and operational optimization after the divestiture, operating margins expand to 9.5% by 2027. (Which is lower than 2024 to adjust for stranded costs.) Applying that margin to the 2027 revenue projection yields:

• Operating income = $286.7 million

Historically, Owens & Minor has traded at roughly 8× operating income. Using this multiple is conservative given that the post-divestiture business will be leaner, have higher margins, and likely post better growth than the historical average. Applying the 8× multiple gives:

• Implied market capitalization = $2.29 billion

With today’s share count of ~77.3 million shares outstanding, that market capitalization would imply a share price of about $29.67 by year-end 2027.

That is roughly a 5.3x from current levels or a whopping 100% CAGR! And I feel my estimations are fairly conservative given I have not taken into account reduced interest expense, faster growth, share buybacks, or any meanigful margin expansion.

Sure this one is not without risks but the upside here is incredible and on a baseline the company is still FCF positive even with no changes! This is one I will certainly be doing more work on to fully address risks and questions.

What do you think of the company?

Disclaimer:

This content is provided for informational and entertainment purposes only and should not be construed as professional financial or investment advice. The opinions expressed herein are solely those of the author, based on personal research and analysis, and do not reflect the views or advice of any financial institutions or licensed professionals. I do not have access to your personal financial situation, goals, risk tolerance, or investment preferences, and therefore cannot provide personalized investment recommendations. It is essential that you conduct your own research, carefully consider all relevant factors, and consult with a licensed financial advisor or other professional before making any investment decisions. Investing inherently involves risk, including the potential loss of principal, and past performance is not indicative of future results. I am not responsible for any decisions, actions, or outcomes resulting from the use of this content. Always ensure that your investments align with your personal financial situation and long‑term objectives.