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Jefferies cuts Sotera Health target to $15, keeps buy rating

Published 2024-12-05, 05:00 p/m
SHC
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On Thursday, Jefferies maintained a Buy rating on Sotera Health (NASDAQ: SHC) but reduced the price target to $15.00 from the previous $18.00. Currently trading at $12.98, the company maintains a "GOOD" overall financial health score according to InvestingPro analysis.

The adjustment reflects the firm's view on the company's financial outlook in the wake of the post-COVID economic environment. Sotera Health, like many businesses, is experiencing a reset period, though with a longer duration than some had anticipated.

The analyst from Jefferies noted that while an EBITDA organic growth of 5%-8% is feasible for Sotera Health, this projection falls short of earlier expectations. The company's current EBITDA stands at $547 million, with revenue growing at 13.1% over the last twelve months.

Furthermore, the firm's free cash flow (FCF) predictions for the years 2025 to 2027 did not meet the analyst's original estimates. The primary reason for this shortfall is attributed to an anticipated increase in cash taxes. Despite these challenges, the analyst's stance remains positive, based on the company's current valuation.

In conclusion, Jefferies has expressed confidence in Sotera Health's value as an investment, despite acknowledging certain financial headwinds and a recalibration of growth expectations. The firm's endorsement of a Buy rating indicates a belief that the stock holds potential for investors, even with the adjusted price target.

In other recent news, Sotera Health's three-year financial forecast and growth outlook was reported to be slightly below expectations in terms of both revenue and EBITDA, according to Piper Sandler. The firm maintained a neutral rating on the company's shares, citing the ongoing ethylene oxide litigation uncertainties and a modest EBITDA growth outlook, which anticipates a compound annual growth rate of 5-8%. Despite these factors, Sotera Health's business model, which includes services with high customer retention and significant entry barriers for competitors, provides a solid foundation for its operations.

Shifting focus to Centerra Health, the company reported promising Q3 results, indicating a solid performance with both revenues and adjusted EBITDA experiencing healthy growth. The total revenues saw a year-over-year increase of 8.5% to $285 million, while the adjusted EBITDA grew by 9% to $146 million. Notably, Centerra Health's largest segment, Sterigenics, reported a 4.3% growth in revenue, and the Nordion segment saw a significant 28% increase.

In addition to these recent developments, Centerra Health confirmed its full-year 2024 outlook, expecting both revenue and adjusted EBITDA to grow in the 4-6% range. Despite ongoing litigation in Georgia and California, the company remains focused on its strategic direction and the safety of its operations.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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