Embecta raises adjusted operating margin and EPS outlook despite 8.1% revenue decline
Key Facts
Embecta reported results on August 7 for the quarter and nine months ended June 30, 2026, posting quarterly revenue of $271.7 million, down 8.1% on a reported basis and 8.9% excluding the impact of currency compared with the same period a year earlier. At the same time, the company raised its fiscal 2026 outlook for adjusted operating margin and adjusted diluted earnings per share, while keeping its annual revenue range unchanged. The results present investors with a mixed picture: year-over-year declines in sales and profitability, alongside improved performance compared with the second quarter and higher earnings expectations. The company said third-quarter revenue rose by about $50 million from the previous quarter. GAAP operating income increased by about $14 million, and adjusted operating income by about $21 million, sequentially.
The divergence between markets led the revenue details: U.S. sales fell 24.6% year over year, while international revenue rose 11.5% on a reported basis and 9.7% excluding the impact of currency. Growth in international markets did not offset the U.S. decline, and total quarterly revenue fell despite improving from the previous quarter. The CEO said the sequential increase reflected improved performance in the United States and international markets, along with a contribution from the acquisition of Owen Mumford. Embecta completed the acquisition during the quarter, and the acquired company contributed $13.8 million to revenue for the three months ended June 30. Embecta said the integration is proceeding as planned.
On profitability, net income fell to $21.1 million, or $0.36 per diluted share, from $45.5 million and $0.78 per share in the third quarter of the prior fiscal year. Gross margin declined to 56.4% from 66.7%, while operating income fell to $48.7 million from $94 million. Operating income margin was 17.9%, compared with 31.8% a year earlier. These comparisons show that the increase from the second quarter did not end the year-over-year declines in revenue, earnings and margins. By contrast, the company raised its annual guidance for adjusted profitability measures while leaving its revenue range unchanged.
The company raised its fiscal 2026 adjusted operating margin range to 23.50%-24.00% from 22.25%-23.25%. It also increased its adjusted diluted earnings per share outlook to $1.80-$1.90 from $1.55-$1.75. Embecta kept its fiscal-year revenue outlook range unchanged, separating the improved profitability estimate from its sales outlook. The CEO linked the sequential improvement to a combination of market performance and Owen Mumford’s contribution, which added revenue during the quarter. These revisions provide higher guidance for adjusted margins and earnings while quarterly revenue remains below its level a year earlier.
Operating activities generated net cash of $41.8 million during the three months ended June 30, while free cash flow, a non-GAAP measure, was $40.7 million. The company repaid about $53 million of debt during the quarter and repurchased about $9 million of shares under a three-year program valued at up to $100 million. At the end of June, cash, cash equivalents and restricted cash totaled $218.2 million, against outstanding debt of $1.469 billion. The figures show positive cash flows alongside a substantial debt burden. The company also declared a quarterly cash dividend of $0.01 per share, payable on September 15 to shareholders of record on August 27.
In the context of its brand transition, Embecta said in its previous update that more than 75% of its revenue was represented by products launched and shipped under its brand, and that it aims to complete most of the brand transition by the end of 2026. This follows the separation of its diabetes care business and the development of the company’s brand identity, while the Owen Mumford acquisition added products and revenue to its portfolio during the quarter. Following the results announcement on August 7, the stock rose 13.43% in premarket trading to $3.97, according to Investing.com coverage, which attributed the move to adjusted earnings beating analyst expectations and the raised annual outlook. The supplied price data do not include details of the session’s high or low. The end of 2026 remains the company’s target for completing most of the brand transition.