On Thursday, Leerink Partners revised its rating on Envista Holdings Corp . (NYSE: NYSE:NVST), upgrading the company from Underperform to Market Perform and raising the price target to $23.00 from the previous $16.00. The adjustment reflects Leerink Partners' recognition of management's efforts in beginning to stabilize the company's performance.
The firm's analysis indicates that Envista's management has taken early steps towards stabilizing the company, particularly in the area of dental implants, with more moderate investments than initially anticipated. This strategic approach has led to increased estimates for out-year earnings, prompting the upgrade.
Despite the upgrade, Leerink Partners maintains a cautious outlook, noting that Envista's stock is currently trading at the higher end of its historical range and a significant premium compared to its peer, Dentsply Sirona (NASDAQ: XRAY), when evaluated against comparable earnings power.
The analyst pointed out that while there are signs of stabilization under the new management, the stock's current price appears to factor in a considerable rebound that might not materialize as quickly as some expect.
The revised price target of $23.00 is based on an increased target multiple, from approximately 10 times CY26 EV/EBITDA to approximately 13 times, to account for the management's role in the ongoing efforts to stabilize performance. The firm's commentary suggests that while the early steps are promising, there is still a need for Envista to invest in growth and reboot its product portfolio, which could result in a more gradual EBITDA recovery.
In summary, Leerink Partners has acknowledged the emerging signs of stabilization at Envista Holdings Corp., leading to the upgrade in rating to Market Perform, but remains measured in its outlook due to the tough dental market and the premium pricing of the stock.
In other recent news, Envista Holdings Corp. reported third-quarter earnings and revenue that surpassed analyst expectations. The dental products maker recorded adjusted earnings per share of $0.12, exceeding the projected $0.09, and revenue of $601 million, surpassing the consensus estimate of $590.36 million. Despite this, the company's net income fell to $8.2 million, compared to $21.5 million in the same period last year.
Evercore ISI maintained a positive outlook on Envista, reiterating an Outperform rating with a $23.00 price target. The firm acknowledged the company's revenue performance, which exceeded expectations by approximately 2%, highlighting exceptional results in the Equipment & Consumables division. Despite a decline in diagnostics and consumables sell-in, this division achieved core growth of (5.6%) for the quarter.
The Specialty Products & Technologies segment also reported a core growth of (5.2%), propelled by orthodontics. Management at Envista Holdings Corp. has reaffirmed its full-year 2024 guidance, anticipating a return to growth in the fourth quarter.
These are among the recent developments for Envista Holdings Corp.
InvestingPro Insights
To complement Leerink Partners' analysis of Envista Holdings Corp. (NYSE: NVST), recent data from InvestingPro offers additional context. Despite the company's recent challenges, InvestingPro Tips suggest that net income is expected to grow this year, aligning with the analyst's observation of early stabilization efforts. This potential growth could support the management's strategy to invest moderately in key areas like dental implants.
The company's financial health appears stable, with InvestingPro data showing that liquid assets exceed short-term obligations. This financial cushion may provide Envista with the flexibility needed to execute its stabilization and growth plans, as noted in the Leerink Partners report.
However, it's important to note that Envista's revenue growth has been negative, with a -1.86% decline in the last twelve months as of Q2 2023. This data point underscores the challenges in the dental market mentioned in the article and explains why the analyst remains cautious despite the upgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Envista Holdings Corp., providing a deeper understanding of the company's financial position and market outlook.
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