Morningstar | Getinge's Second-Quarter Results Mixed, but Profitability Set to Improve Into 2020; Shares Expensive
No-moat Getinge reported results that largely met our expectations, with strong revenue growth overshadowed by margin performance that remained muted. As we update our model, we don't expect to make major changes but could see a slight uptick in our SEK 97 per share fair value estimate. We view shares as somewhat overvalued following the strong performance year to date.The company posted another quarter of above-trend revenue growth, with a top line that grew 4% organically led by the acute care therapies segment. From a regional perspective, growth in the Americas and in Asia-Pacific drove the bulk of the firm's expansion, as European sales remained roughly flat. Year-to-date organic net sales growth of nearly 5% stands well ahead of management's maintained 2%-4% guidance range for the year. While management conceded the firm is likely to end up at the high end of this range, we continue to believe the outlook appears conservative.
On the margin front, despite the segment shift toward higher-margin ACT sales of capital equipment outpaced growth in consumable products on an organic basis, leaving adjusted gross margin down slightly from last year and roughly 150 basis points below first-quarter levels. While the ACT and life sciences segments saw some year-over-year improvement in adjusted EBITA margin, surgical workflows disappointed leaving firmwide profitability unchanged. The shortfall in surgical was largely attributed to implementation and execution issues at a handful of specific projects, along with ongoing restructuring initiatives. Notably, this segment has been the primary recipient of the over SEK 200 million in restructuring spend year to date, which management expects to translate into better earnings out of the business in the second half of 2019 and into 2020. This is consistent with our expectations for modest margin expansion for the full year.
Getinge is engaged in three business areas: Medical Systems, Extended Care and Infection Control. Medical System's product range includes surgical tables, surgical lamps, telemedicine, perfusion products, instruments for bypass operations, ventilators, anesthesia systems, synthetic vascular implants and stents. Extended Care's product range includes bathing and shower solutions, lifting equipment and mattresses for the treatment and prevention of pressure ulcers, as well as service and consulting. Infection Control's product range comprises disinfectors, sterilizers, information technology systems and related equipment, as well as service and consulting.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.