On Wednesday, UBS adjusted its price target on Gerresheimer AG (GXI:GR) (OTC: GRRMF) shares, a manufacturer specializing in pharmaceutical and healthcare packaging, to EUR144 from the previous EUR145 while reaffirming a Buy rating on the stock. The slight revision reflects the integration of the Bormioli acquisition into the firm's financial model starting from the fiscal year 2025 and updated earnings estimates.
UBS's analysis of Gerresheimer's second quarter 2024 results and the broader market context prompted the minor adjustment. The firm has observed a keen interest from investors in understanding the company's valuation compared to its peers and the impact of recent sector-specific developments. Gerresheimer's stock is noted for trading at a discount relative to similar companies.
Incorporating Bormioli into their valuation, UBS has increased its forecast for Gerresheimer's earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fiscal years 2025 to 2028 by an average of 13.6% and 20 basis points, which is above the company's guidance of a 50-100 basis point increase.
The firm's earnings per share (EPS) estimates have also been raised by approximately 10.4% for the company and 8.5% for UBS's own estimates, against a guidance of more than 10% growth in the first year.
Despite being more conservative about Gerresheimer's second half of 2024 organic sales growth (OSG), projecting 4.3% compared to the company's guidance of 5%, UBS maintains that the stock presents a favorable risk-reward balance at current levels. The raised free cash flow (FCF) estimates correspond to an approximate 33% average conversion level, below the 60-70% guided range.
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