Healthcare solutions provider Solventum (NYSE: SOLV) announced better-than-expected revenue in Q1 CY2025, with sales up 2.7% year on year to $2.07 billion. Its non-GAAP profit of $1.34 per share was 9.7% above analysts’ consensus estimates.
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Solventum (SOLV) Q1 CY2025 Highlights:
- Revenue: $2.07 billion vs analyst estimates of $2.01 billion (2.7% year-on-year growth, 2.7% beat)
- Adjusted EPS: $1.34 vs analyst estimates of $1.22 (9.7% beat)
- Adjusted EBITDA: $330 million vs analyst estimates of $483 million (15.9% margin, 31.7% miss)
- Management reiterated its full-year Adjusted EPS guidance of $5.55 at the midpoint
- Operating Margin: 7.3%, down from 18.9% in the same quarter last year
- Free Cash Flow was -$80 million, down from $340 million in the same quarter last year
- Organic Revenue rose 4.3% year on year (0.9% in the same quarter last year)
- Market Capitalization: $11.33 billion
"Our first quarter fiscal year 2025 results reflect solid revenue growth across our business and the positive progress we're making as part of our 3-phased transformation," said Bryan Hanson, CEO of Solventum.
Company Overview
Founded in 1985, Solventum (NYSE: SOLV) develops, manufactures, and commercializes a portfolio of healthcare products and services addressing critical customer and therapeutic patient needs.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Solventum’s sales grew at a tepid 1.2% compounded annual growth rate over the last two years. This fell short of our benchmarks and is a tough starting point for our analysis.
We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Solventum’s organic revenue averaged 1.6% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results. 
This quarter, Solventum reported modest year-on-year revenue growth of 2.7% but beat Wall Street’s estimates by 2.7%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.
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Operating Margin
Solventum’s operating margin has shrunk over the last 12 months, but it still averaged 17.2% over the last three years, solid for a healthcare business. This shows it generally manages its expenses well.
In Q1, Solventum generated an operating profit margin of 7.3%, down 11.6 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Sadly for Solventum, its EPS declined by 21.9% annually over the last two years while its revenue grew by 1.2%. This tells us the company became less profitable on a per-share basis as it expanded.
In Q1, Solventum reported EPS at $1.34, down from $2.08 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 9.7%. Over the next 12 months, Wall Street expects Solventum’s full-year EPS of $5.95 to shrink by 5%.
Key Takeaways from Solventum’s Q1 Results
We enjoyed seeing Solventum beat analysts’ organic revenue and EPS expectations this quarter. On the other hand, its EBITDA missed. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $66.63 immediately after reporting.
So do we think Solventum is an attractive buy at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
