On Thursday, JPMorgan (NYSE:JPM) adjusted its stance on Envista Holdings Corp . (NYSE:NVST), downgrading the stock from Overweight to Neutral. The firm also reduced the price target for Envista to $16.00 from the previous $23.00.
The downgrade followed Envista's recent earnings release, which revealed both top-line and bottom-line misses. The company reported core growth of -3.2%, below the expected -1.7%, with revenues totaling $633.1 million against the anticipated $648 million.
The company's Specialty & Technologies (S&T) revenues matched expectations at $415 million, but Equipment & Consumables (E&C) revenues fell short at $218 million, compared to the forecasted $231 million.
Additionally, adjusted EBITDA margins were reported at 10.0%, which was below the street's expectation of 13.3%. This shortfall was attributed to revenue deferrals for Spark, increased investments in sales and marketing, and an unfavorable product mix.
Looking forward, Envista provided its core revenue guidance for 2024, projecting a decrease of 4% to 1%, which contrasts with the previous market expectation of a 0.5% increase. The anticipated adjusted EBITDA margin is set to be in the range of 10-12%, versus the street's forecast of 14.2%.
Management did not provide comments on EPS expectations. The company plans to invest in Spark manufacturing, direct-to-consumer initiatives, and continue investing in its Nobel Biocare business.
JPMorgan's revised outlook reflects a cautious approach to the dental market, noting its dependence on equipment sales and discretionary spending, which ties closely to the broader economic environment.
After evaluating Envista's disappointing quarter and considering the current valuation, which stands at 8.5x 2025 EV/EBITDA compared to its closest peer at 8.8x, JPMorgan sees the risk/reward profile as balanced and has thus established the new price target based on a rolled forward discounted cash flow to December 2025.
In other recent news, Envista Holdings has been the subject of two notable analyst actions. Baird recently adjusted the price target for Envista Holdings, lowering it to $17.00 from the previous $19.00 due to valuation concerns.
The firm noted that Envista's shares are trading at nearly 16 times the next twelve months' earnings per share estimate, which is higher than anticipated by the buy-side. In contrast, Baird upgraded Henry Schein (NASDAQ:HSIC) to an Outperform rating, citing confidence in its ability to deliver consistent earnings growth.
In more recent developments, Envista Holdings maintained its Neutral rating and a price target of $18.00, following significant changes in its executive team.
The company announced the appointment of Eric Hammes as the new Chief Financial Officer, Stefan Nilsson as the President of Nobel Biocare, and Veronica Acurio as President of Orthodontics. These appointments come with a wealth of experience in the dental industry, anticipated to contribute to the company's future operations.
InvestingPro Insights
As Envista Holdings Corp. (NYSE:NVST) navigates through a challenging period, highlighted by JPMorgan's downgraded rating and price target adjustment, it's essential to consider additional financial metrics and analyst insights. According to InvestingPro data, Envista's market capitalization currently stands at $2.63 billion, with a forward P/E ratio for the next twelve months estimated at 28.16, suggesting expectations of earnings growth despite recent performance. The company's price/book ratio is at a modest 0.64, potentially indicating undervaluation relative to its assets.
InvestingPro Tips reveal that analysts are predicting Envista will become profitable this year, which aligns with the company's own projections despite the recent downturn in stock price. The stock has indeed taken a significant hit, trading near its 52-week low, which could present a buying opportunity for investors who believe in the company's potential for a turnaround, especially considering that Envista's liquid assets exceed its short-term obligations.
For investors seeking a deeper dive into Envista's financial health and future prospects, InvestingPro offers additional tips and insights. Currently, there are 9 more InvestingPro Tips available for Envista, which can be accessed for those looking for a more comprehensive analysis.
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