Embecta beats earnings estimates on strong international growth
Diabetes care company maintains FY26 guidance despite 7.6% U.S. revenue decline
Embecta Corp. shares rose 4% on Thursday after the diabetes care company reported first-quarter fiscal 2026 results that topped analyst expectations, demonstrating the benefits of its strategy to expand international operations while strengthening its balance sheet.
The company, which spun off from Becton Dickinson in April 2022 to become one of the world's largest pure-play diabetes care businesses, reported adjusted earnings per share of $0.71, beating the consensus estimate of $0.67 by 6%. Revenue reached $261.2 million, exceeding expectations of $258.1 million despite a year-over-year decline of $700,000.
The earnings performance was driven by an improvement in gross margins to 61.9% from 60% in the prior year, reflecting operational efficiencies and product mix optimization. However, the results revealed a tale of two markets: U.S. revenue fell 7.6% while international sales grew 8.4%, highlighting the company's progress in diversifying beyond its domestic market.
"Our first-quarter performance reflects our continued focus on operational discipline and balanced geographic growth," the company stated in its earnings announcement.
Embecta maintained its full fiscal year 2026 guidance, projecting adjusted earnings per share between $2.80 and $3.00, with an expected adjusted operating margin of 29% to 30%. The guidance suggests confidence in the company's ability to navigate market challenges, including competitive pressures in the U.S. insulin delivery market.
The company also made progress on its balance sheet objectives, reducing debt by $37.5 million during the quarter. This continues Embecta's deleveraging efforts after reducing debt by approximately $184.5 million in fiscal year 2025, exceeding its original target. The company has indicated plans to repay another $150 million in debt during fiscal year 2026.
In a move that will appeal to income-focused investors, Embecta's board declared a quarterly cash dividend of $0.15 per share, payable March 17 to shareholders of record as of February 27. The annualized dividend of $0.60 per share represents a yield of approximately 5.3% based on the current share price.
The stock, which has a market capitalization of $648 million, currently trades at a price-to-earnings ratio of 6.75, significantly below the average for healthcare technology companies. Analysts have set an average price target of $16.67, suggesting potential upside of nearly 47% from current levels.
Embecta's nearly century-old legacy in diabetes care positions it as an established player in the insulin delivery market, with a portfolio that includes insulin syringes and pen needles. The company received FDA clearance for a disposable insulin-delivery patch pump in September 2024, though it subsequently decided to discontinue the full market launch to focus on other strategic priorities.
The international growth demonstrated in the quarter will be closely watched by investors, as the company continues to execute on its strategy to reduce reliance on the U.S. market, which has faced pricing pressure and reimbursement challenges. With the dividend announcement and debt reduction, Embecta is signaling its commitment to returning capital to shareholders while maintaining financial flexibility for strategic investments.