CareFusion (CFN) Holds Potential for Investors as the Turnaround Continues - Barron's
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There's three things investors looking at CareFusion (NYSE: CFN) are likely to cringe at:
Barron's is making the most solid case to all but dump "Johnny-come-lately's" like Covidien (NYSE: COV), Teleflex (NYSE: TFX), and Becton Dickinson (NYSE: BDX), and take a closer look at the "journeyman" stock.
One analyst from Raymond James basically called CareFusion a Missouri stock -- its a "show-me" story -- with CareFusion having the right valuation, but needing to impress with better earnings growth.
CareFusion gets 60 percent of top-line growth from its medical systems business. That include ventilators, drug-infusion pumps, and drug dispensing machines. The products aren't insulated from economic events, but do aid hospitals in preventing blunders and the spread of infection.
To make earnings growth that much easier, CareFusion has been looking to divest non-core assets over the past year. The aim is to reduce certain expenses in an effort to redirect funds where its needed most: research and development.
The company also has a rather solid balance sheet and cash flow. Barron's noted CareFusion holds about $1.4 billion in cash as of its latest reading. Free cash flow recently came in at $600 million, with a yield of 10 percent -- both impressive numbers.
Analysts are currently expecting just an 11 percent gain in earnings to $1.98 in fiscal 2013 (which will start in July). A bullish outlook calls for a 14 percent jump to $2.03.
CareFusion isn't the prettiest thing out there: sour guidance for fiscal 2013 (expected in August) is likely to hurt shares. Solidifying fundamentals and a slight improvement to operations, however, might do wonders for the medical technology company. Shares are down 13.1 percent from a 52-week high of $28.25 hit last July, before market pressure took over. The industry average P/E is at 14.9 times, compared to 12.4 times expected for CareFusion in 2013. Giving a 14.5 times multiple on the stock, shares could get to $28.70 in the next 12 months, a 16 percent to 17 percent premium.
Shares are flat ahead of the bell Friday.
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- profit margins are still growing at a slower rate than the industry average;
- revenue growth is even slower; and
- unpredictable earnings have caused investors to flee in hordes, return in hordes, than flee again.
Barron's is making the most solid case to all but dump "Johnny-come-lately's" like Covidien (NYSE: COV), Teleflex (NYSE: TFX), and Becton Dickinson (NYSE: BDX), and take a closer look at the "journeyman" stock.
One analyst from Raymond James basically called CareFusion a Missouri stock -- its a "show-me" story -- with CareFusion having the right valuation, but needing to impress with better earnings growth.
CareFusion gets 60 percent of top-line growth from its medical systems business. That include ventilators, drug-infusion pumps, and drug dispensing machines. The products aren't insulated from economic events, but do aid hospitals in preventing blunders and the spread of infection.
To make earnings growth that much easier, CareFusion has been looking to divest non-core assets over the past year. The aim is to reduce certain expenses in an effort to redirect funds where its needed most: research and development.
The company also has a rather solid balance sheet and cash flow. Barron's noted CareFusion holds about $1.4 billion in cash as of its latest reading. Free cash flow recently came in at $600 million, with a yield of 10 percent -- both impressive numbers.
Analysts are currently expecting just an 11 percent gain in earnings to $1.98 in fiscal 2013 (which will start in July). A bullish outlook calls for a 14 percent jump to $2.03.
CareFusion isn't the prettiest thing out there: sour guidance for fiscal 2013 (expected in August) is likely to hurt shares. Solidifying fundamentals and a slight improvement to operations, however, might do wonders for the medical technology company. Shares are down 13.1 percent from a 52-week high of $28.25 hit last July, before market pressure took over. The industry average P/E is at 14.9 times, compared to 12.4 times expected for CareFusion in 2013. Giving a 14.5 times multiple on the stock, shares could get to $28.70 in the next 12 months, a 16 percent to 17 percent premium.
Shares are flat ahead of the bell Friday.
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