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Liberum upgrades UDG Healthcare to 'buy'
Expectations for UDG Healthcare's earnings in 2018 and 2019 are too gloomy, Liberum said as the broker upgraded the provider of services to the healthcare industry to 'buy'.
The FTSE 250 company's guidance is for organic revenue growth of 0-3% in 2018 and analysts' consensus is at the bottom of the range, but UDG will do better, Liberum analyst Graham Doyle wrote in a note. He upped his rating from 'hold' and maintained a price target of 884p a share.
In further evidence of market pessimism, UDG shares have lost more than a fifth of their value since November and the percentage of analysts with a 'buy' rating has dropped from 90% to 40% in the past year, Doyle said. Now is the time to take advantage of an "attractive entry point" for the shares, he said.
Doyle wrote: "Consensus earnings expectations are too pessimistic, lying at the bottom-end of a 2018 guidance range (implying zero organic growth) that we expect management to beat. With UDG set to enter another upgrade cycle and [with] the shares off 22% from their November peak, we upgrade to 'buy'."
Analysts are also underestimating UDG's potential performance in 2019 after 18 months of underperformance. Organic growth will be 4% in 2018 and 13% in 2019 when UDG will regain its "darling status" with investors, he said. UDG has the financial strength to make acquisitions that would add to earnings, he added.
At 1305 GMT, the shares were up 4.6% to 776p.