- Revenue Growth and Margins: Q1 2026 revenue rose 0.4% to $5.3B, with New BD growth at 2.5%; adjusted gross margin hit 53.4%, exceeding expectations.
- Cash Distribution and Capital Allocation: $4B from Waters transaction, $2B for buybacks and $2B for debt paydown, alongside $550M returned to shareholders ($250M in share repurchases).
- EPS Guidance and Free Cash Flow: Adjusted EPS of $2.91 beat estimates; $548M FCF (66% conversion) supports $12.35–$12.65 2026 EPS guidance (6% mid-point growth).
- GLP-1 Franchise Momentum: On track for $1B annual revenue by 2030, with 80+ GLP-1s contracted in devices and injectables maintaining strong growth.
- Alaris Competitive Gains: Alaris secured record new wins, gaining ~1 share point, with share nearing 60% despite 100–200 bps headwinds in 2026–2027.
Financial Performance and Guidance
The company expects low single-digit revenue growth for fiscal 2026, with an adjusted EPS guidance of $12.35 to $12.65, reflecting growth of approximately 6% at the midpoint. The guidance is prudent, according to CEO Thomas E. Polen, and the company is well set up for a stable outlook. The company's pricing environment is stable, with pricing generally flat to slightly positive, and they expect positive pricing in the rest of the world.
Segment Performance and Innovation
The company has made significant progress on its commercial initiatives, including planned sales force expansion and accelerating initiatives to make PureWick at home available for veterans. The company also strengthened its innovation pipeline by completing the reallocation of $50 million of central R&D to the businesses to fund multiple new product innovations in high-growth platforms. Alaris is seeing strong competitive momentum, with a record number of new competitive wins in the quarter and a gain of about a full point of share.
Valuation and Return Metrics
With a P/E Ratio of 33.65, the stock appears to be fairly valued, considering the company's expected earnings growth. The EV/EBITDA ratio of 14.98 also suggests a reasonable valuation. The company's return on equity (ROE) is 6.38%, and return on invested capital (ROIC) is 4.22%, indicating a decent return on capital employed. The dividend yield of 2.01% provides a relatively stable source of return.
Outlook and Risks
The company faces some known headwinds, including China VBP, which is expected to impact 80% of the portfolio by 2026, with an expected headwind of 250 basis points for the full year. The vaccine business is also expected to be a headwind in 2026, but its impact will likely decrease in 2027. However, the company's diversified portfolio and focus on high-growth areas are expected to drive long-term growth. Analysts estimate next year's revenue growth at 3.0%, which is relatively modest, but the company's focus on innovation and commercial excellence is expected to drive growth.