Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

UDG Healthcare upgraded to ‘Buy’ by Jefferies as broker says market “overreacted” to C&C weakness

AnalystS said that reaction to the weaker performance in the C&C division was “overblown”, “especially given the continued strong performance in Communications and Advisory”
Surgeons
The broker also trimmed its target price to 890p from 895p to reflect a 20% potential upside

UDG Healthcare PLC (LON:UDG) has been upgraded to ‘Buy’ from ‘Hold’ by broker Jefferies as it said the market was discounting momentum in the business and had overreacted to a weaker performance in the commercial & clinical (C&C) arm of its Ashfield business.

Analysts at the broker said that market reaction to the weaker performance in the C&C division was “overblown”, “especially given the continued strong performance in Communications and Advisory”.

READ: UDG Healthcare sells non-core Aquilant division and reviews Ashfield business

“While C&C accounts for 68% of Ashfield's sales, it only accounts for 39% of [underlying earnings] EBITA and so while we expect it to remain core to its business, we expect future focus to be more towards the higher margin Communications and Advisory businesses” they added.

Jefferies also said that they expected “double-digit operating profit growth in [the third quarter]” in addition to 7.8% growth in EBITDA in the second half of the financial year, adding that “encouraging” performance in the US market for UDG’s Sharp division led them to predict that “positive momentum should continue in 2019”.

Additionally, analysts said the firm’s sell-off of its Aquilant division to a European private equity firm provided “a compelling entry point” as the sell-off coupled with the negative market reaction to the weaker performance in C&C was “the buying opportunity we’ve been waiting for” as the market was currently “discounting momentum in the rest of the business…given management’s solid track record”.

On Wednesday, UDG said it had agreed to sell Aquilant, a distributor of specialist medical, pharmaceutical and scientific products, to H2 Equity Partners for an initial €20.5mln in cash and a deferred consideration of up to €2.5mln based on whether the business meets gross profit targets in fiscal years 2018 and 2019.     

The broker also trimmed its target price to 890p from 895p previously, reflecting a 20% potential upside.

In mid-morning trading Thursday, UDG shares were up 3.8% at 763p.

View full UDG profile View Profile

UDG Healthcare Timeline

Related Articles

scientist looking through microscope
April 11 2018
Kumaraguru Raja sees “multiple catalysts” in the year ahead which could put a rocket under the share price
1511901712_biotech_517925923.jpg
November 29 2017
The company has developed a "unique and superior pressure" cycling technology (PCT), says Zacks.
cholesterol on a dial
September 24 2018
"The formation of ProBiotix Health and appointment of Adam Reynolds as chairman continues a successful strategy of building value in each division which is materialised by forming separate legal entities and taking them to a public listing,” said chief executive Stephen O’Hara

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use