BTIG Upgrades Embecta (EMBC) to Buy

BTIG analyst Marie Thibault upgraded Embecta (NASDAQ: EMBC) from Neutral to Buy with a price target of $26.00.

The analyst comments "Embecta shares gained ~30% in Tuesday trading as investors rewarded management's decision to discontinue the patch pump program (see our flash note here). We are pleased with the decision from a financial perspective. We especially like the rebound in adj. EBIT margin as a result of a steep cut in R&D spending. This will unlock significant free cash flow for EMBC to repay debt and reduce its net leverage ratio to ~3x by the end of FY25. When combined with fewer separation-related expenses ($50-60M in FY25 vs $165M in FY24), we think EMBC may eventually be able to pursue more opportunistic M&A where they can leverage their core competencies, as management has stated. With fewer moving parts to the EMBC story, a demonstrated ability to overcome secular headwinds from pumps and GLP-1s (~1% revenue CAGR since spin), healthier FCF generation, a track record of beatand-raise quarters, a strong competitive moat with high-volume device manufacturing capabilities, a global commercial footprint, and a valuation that is still at the bottom of the peer-group, we are upgrading EMBC to Buy. Our $26 PT is based on 9x our 12-24 month EPS estimate. We believe this multiple, still a discount to Medical Supplies peers, is appropriate as it balances flattish revenue against EMBC's better-than-peers margin profile."

For an analyst ratings summary and ratings history on Embecta click here. For more ratings news on Embecta click here.

Shares of Embecta closed at $18.70 yesterday.

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