On Wednesday, Canaccord Genuity adjusted its outlook on Bioventus Inc (NASDAQ:BVS) shares, increasing the price target to $15 from the previous $12, while maintaining a Buy rating on the stock. The decision followed Bioventus's robust third-quarter results, which surpassed expectations in revenue, adjusted EBITDA, and pro forma EPS.
Bioventus experienced double-digit growth in its Pain Treatments and Surgical Solutions segments and reported improved sales force execution in its Exogen business.
Despite raising the lower end of its revenue and adjusted EPS guidance, the company anticipates a relative slowdown in year-over-year growth for the fourth quarter compared to the third. This projection is attributed to the company facing more challenging comparisons due to its performance improvement in the fourth quarter of 2023.
The company also indicated that it expects some deceleration in its Bone Growth Stimulators (BGS) business over the next few quarters as it integrates new distributors, a process that was previously postponed due to supply chain challenges earlier in the year.
Nevertheless, Bioventus expressed confidence in achieving double-digit growth in Ultrasonics, above-market growth in Hyaluronic Acid (HA) treatments, and low to mid-single-digit growth in Exogen by 2025.
In addition to these growth prospects, Bioventus is aiming for an adjusted EBITDA margin improvement of over 100 basis points post-2025 and a significant acceleration in cash flow from operations by reducing inventory levels, interest expenses, and one-time cash costs. The company also reiterated its goal to bring its net debt to adjusted EBITDA ratio below 3x before the end of 2025.
Bioventus is planning to divest its Advanced Rehab business, with the transaction expected to close late in 2024 or early 2025. Although this business represents a small portion of the company's financial profile, the sale is anticipated to help reduce debt and further refine the company's portfolio focus.
The firm's analysis suggests that Bioventus is transitioning from a recovery narrative to one of execution, as the company demonstrates improved commercial performance across its main business units. Despite facing competition, Bioventus's financial flexibility is expected to support continued investments in commercial activities and research and development, enabling the company to stay competitive in the market.
In other recent news, Bioventus Inc. has been maintaining a strong financial trajectory, highlighted by a 14% increase in organic revenue growth in the second quarter of 2024. The company has also raised its financial guidance for the year, projecting higher net sales, adjusted EBITDA, and adjusted earnings per share.
This growth was primarily driven by the Surgical Solutions and Pain Treatments segments, with significant contributions from the Ultrasonics and Bone Graft Substitutes product lines, and a surge in demand for osteoarthritis treatments.
In a strategic move, Bioventus has announced its plan to divest its Advanced Rehabilitation business. The divestiture, viewed favorably by Canaccord Genuity, is set to reduce approximately $20,000 of the company's existing debt, although it will result in a loss of around 9% of its trailing twelve months revenues and approximately 6% of its TTM adjusted EBITDA.
Despite an increase in adjusted total operating expenses due to higher sales commissions and a growing workforce, the International segment grew by 4%, with acceleration expected in the latter part of the year. The company's HA business, particularly the Durolane product, is successfully gaining market share as Bioventus focuses on geographical expansion and investment in high-growth potential areas.
As part of these recent developments, the company anticipates continued mid-single-digit growth for the Exogen business throughout the year and has updated its 2024 financial guidance, signaling confidence in its performance and market position.
InvestingPro Insights
Bioventus Inc's recent performance and future outlook align with several key metrics and insights from InvestingPro. The company's revenue growth of 10.4% over the last twelve months and a quarterly revenue growth of 15.04% in Q3 2024 support Canaccord Genuity's positive assessment of Bioventus's robust third-quarter results.
InvestingPro Tips highlight that Bioventus's net income is expected to grow this year, and analysts predict the company will be profitable this year. This aligns with the company's improved performance and its goal to enhance adjusted EBITDA margins. The stock has also shown a strong return over the last three months, with a 41.9% price total return, reflecting investor confidence in the company's turnaround strategy.
However, it's worth noting that Bioventus is currently trading at a high EBITDA valuation multiple, which investors should consider in light of the company's growth prospects and debt reduction plans. For a more comprehensive analysis, InvestingPro offers 11 additional tips for Bioventus, providing investors with a deeper understanding of the company's financial health and market position.
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