Solventum (SOLV) stock plummeted 5.18% in pre-market trading on Friday, despite the company reporting better-than-expected earnings for the fourth quarter of 2024.

The diversified healthcare company's adjusted earnings per share of $1.41 topped analysts' estimates of $1.31, while revenue of $2.07 billion also exceeded the forecast of $2.05 billion. However, the positive earnings surprise was overshadowed by a significant decline in adjusted free cash flow and operating margins.

Solventum's adjusted free cash flow fell sharply to just $92 million in Q4 2024, down a staggering 80% from $459 million in the year-ago quarter. The company's operating income margin also plunged to 6.6%, a contraction of over 13 percentage points compared to 19.9% in Q4 2023.

According to the earnings report, increased costs and regulatory pressures weighed heavily on Solventum's margins and cash generation during the quarter. While the company's revenue growth held up relatively well, driven by strength in segments like MedSurg and Purification & Filtration, higher expenses appear to have offset much of those gains.

Looking ahead, Solventum projected organic sales growth of 1-2% for 2025 and an adjusted EPS range of $5.45 to $5.65. However, investors may remain concerned about the company's ability to sustain profitability and cash flows amid the challenging operating landscape.