Embecta (Nasdaq:EMBC) today reported second-quarter financial results that fell shy of expectations on Wall Street.
The BD Diabetes spinoff attributed shortcomings to increased competitive dynamics and softness in overall market volumes in the U.S. Its international business performed in line with expectations, however.
Shares of EMBC fell 43% to $5.29 apiece before the market opened today.
The Parsippany, New Jersey-based diabetes technology and medical supplies company reported losses of $4.1 million. That equals 7¢ per share on sales of $221.8 million for the three months ended March 31, 2026.
Embecta recorded a bottom-line slide into the red on a sales decrease of 14.4%.
Adjusted to exclude one-time items, earnings per share came in at 27¢. That landed 15¢ short of expectations on Wall Street. Sales also fell shy of estimates, with experts projecting $235.7 million in revenue.
Embecta attributed its decrease in revenues to $39.3 million in unfavorable changes in volume, $3.6 million in unfavorable changes in price and a $2 million decrease in contract manufacturing revenue.
For 2026, the company now expects revenues between $1.015 billion and $1.035 billion. It previously forecast for between $1.071 billion and $1.093 billion. Embecta also cut its adjusted EPS guidance from a prior range of $2.80 to $3 to a current range between $1.55 and $1.75.
Devdatt (Dev) Kurdikar, chair, president and CEO of Embecta, said:
“We were disappointed with our second quarter results as they were significantly below our expectations, driven by a combination of factors which impacted our U.S. business, including increased competitive dynamics and softness in overall market volumes. Our International business performed in line with expectations.
“Given our results, we have initiated a review of our cost structure and organizational footprint and expect to communicate findings and any resulting actions to investors once that process is complete. Our lowered financial guidance assumes that the dynamics which impacted our U.S. business during the second quarter will continue for the balance of the year, as well as the addition of Owen Mumford. What gives us a constructive backdrop against which to manage through this period is the continued progress we are making in achieving important milestones on our strategic priorities and building Embecta into a broader medical supplies company.
“On the strategic front, the pending acquisition of Owen Mumford remains on track to close during May 2026, following satisfaction of all closing conditions and regulatory approvals. This transaction will broaden our product portfolio beyond insulin injection delivery devices, significantly strengthen our B2B drug delivery platform, and it is consistent with the diversification strategy we presented at our 2025 Investor Day.
“Despite the reduction in our revenue and profitability guidance ranges, we continue to expect to repay approximately $150 million in debt during 2026. We also adjusted our capital allocation framework this quarter, as our board authorized a three-year share repurchase program of up to $100 million. Concurrently, we are reducing our quarterly cash dividend from $0.15 to $0.01 per share. Redirecting our regular dividend gives us increased flexibility to deploy capital towards share repurchases or additional debt reduction, consistent with our objective of long-term shareholder value creation.”
The analysts’ take
BTIG analysts Marie Thibault, Alexandra Pang and Sam Eiber downgraded Embecta from “Buy” to “Neutral” on the heels of the results.
The analysts called the earnings report “surprisingly weak,” driven by share loss in the U.S. pen needle market and broader market softness.
“Management observed lower demand for both pen needles and syringes, particularly in the retail channel, due largely to increased adoption of a low-cost pen needle competitor at a large customer, as well as potential headwinds from greater patient access to GLP-1 drugs and expiration of enhanced ACA subsidies,” the analysts said.
Thibault, Pang and Eiber say the company continues to generate free cash flow, but expects that to diminish with the Owen Mumford deal.
“While we had long felt [Embecta] to be undervalued… Our prior ‘Buy’ thesis was predicated on management’s demonstrated ability to maneuver through market and macroeconomic headwinds, generate impressive FCF, and gradually evolve into a revenue growth story. We move to the sidelines because there is now uncertainty on commercial execution and the profitability outlook is disappointing. We no longer have a clear line of sight into when these headwinds will abate.”
