EUR 850.00 For Business Accounts Only

Morningstar | Financial Performance at Getinge Appears to be Moving in the Right Direction

Since going public in 1993, Getinge has established itself as a leading provider of surgical products and operating room supplies, patient handling equipment, and acute care devices on a global basis. Getinge’s position in these markets has been developed through acquisition, including the purchases of Arjo and Huntleigh in 1995 and 2007, respectively, Maquet in 2000, and Boston Scientific’s cardiac surgery and vascular divisions in 2008.Following the 2017 spin-off of the firm's patient and post acute care segment into the stand-alone Arjo AB entity, we anticipate more of the same from the remaining Getinge business in the medium term. While the retained acute care and surgical franchises are the higher growth and margin parts of the business, they are also central to the ongoing remediation issues resulting from the consent decree issued by the FDA in 2015. We anticipate explicit costs associated with recertifying multiple manufacturing sites will likely continue to plague the company over the coming years. Further, we expect the ongoing expense base of the business will likely remain elevated as enhanced quality control initiatives will remain in the longer term, in excess of the current provision allocated to FDA related expenditures. Finally, anticipated dis-synergies associated with the spin-off and ongoing salesforce restructuring efforts add to our below consensus outlook and form the basis for our no moat and negative trend ratings.Volatility in the C-suite has added to our concerns, as the company has seen three CEOs come and go since 2015. We believe building confidence in the current strategy is the first step toward improved operational performance, which should be easier with the division spin-off in the rear-view mirror. Going forward, CEO Mattias Perjos should have more flexibility to influence the firm's strategic direction and improve the growth profile of the business.