Shares in medical products company ConvaTec (CTEC) jumped 5% to 208p after it increased full-year guidance for organic revenue growth towards the top end of its 3.5%-to-5% range.
After a strong first half which saw 7.5% organic growth, third quarter revenues through September grew 3.7% year-on-year to $511 million, up 2.7% in constant currencies and 2.2% on an organic basis.
Performance was driven by continued momentum in advanced wound care which grew 5% organically to $152 million while Ostomy and Continence and Critical care grew by a modest 1.6% and 1.7% respectively.
Infusion devices saw a slight decline of 1.4% against tough comparative growth of 27% in the third quarter of 2020.
The company reiterated full-year guidance for the adjusted operating margin in constant currency to be between 18%-and-19%.
Based on current exchange rates the company said it expected the published margin to be in the range of 17.4%-to-18.4%.
STRATEGIC PROGRESS
The company’s transformation plan remains on track and during the period it disposed of non-core incontinence activities and acquired Patient Care Medical, a ‘quality’ service provider in Austin Texas, for $30 million.
The focus on innovation continued with the firm planning to launch new extended wear infusion sets and a new male catheter in early 2022.
ConvaTec diversified it debts and extended their average maturity by issuing $500 million of unsecured bonds with a coupon of 3.875% maturing in October 2029.
ANALYST UPGRADE
Healthcare analyst Paul Cuddon at Numis upgraded his forecast for organic revenue growth from 4% to 4.7% and for operating margins from 16.7% to 18.2% resulting in a 9% upgrade to full-year earnings per share to $0.13, slightly ahead of consensus.
Cuddon said: ‘Over the last quarter, ConvaTec’s share price has fallen 24% on EPS forecasts that are largely unchanged. Our divisional sum of the parts valuation continues to support our 310p target and we continue to believe recent weakness presents an excellent buying opportunity.’
Convatec is a running Shares top pick for 2021.
