EUR 850.00 For Business Accounts Only

Morningstar | CEO Transition Shakes Up Cantel Medical

On March 5 the board of directors at Cantel Medical announced an unexpected management change as it replaced former CEO Jorgen Hansen effective immediately. Current vice chairman of the board, George Fotiades, will replace Hansen with the stated goal of improving both the firm's organic and acquired growth trajectory. We intend to maintain our Exemplary stewardship rating, as the primary drivers of our assessment--savvy capital allocation, significant insider ownership, and well-aligned incentives--are expected to remain unchanged. We've seen the firm's strategic direction remain remarkably consistent across decades and management teams, and we anticipate more of the same as Fotiades begins to make his mark on the firm's operations in the coming quarters.

Fotiades' background in private equity will likely define many of his near-term priorities, as the company works to integrate and improve the performance of recently acquired businesses. Going forward we anticipate acquisitions will continue to play a similarly important, if not elevated, role in the firm's growth strategy. However, in our discussion with the firm it was also evident that Fotiades is focused on investing behind product development and innovation to sustain Cantel's legacy of superior organic growth--a notable point of weakness over the last four quarters.

We'd highlight that the timing of the announcement comes on the heels of the firm's disappointing second-quarter earnings release and meaningfully lower full-year outlook. While it's possible this will ultimately mark the bottom in investor expectations, we'd await a more structured outlook from Fotiades before sounding the all-clear. We had long felt the stock's valuation reflected an unrealistic outlook for the firm's product pipeline, and we anticipate fresh eyes will allow for more grounded expectations to be set over the coming quarters.