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On Thursday, Goldman Sachs began coverage on Sonic Healthcare (OTC:SKHHY) Ltd. (SHL:AU) (OTC: SKHHY), issuing a Buy rating and setting a price target of AUD32.20. The new rating is based on the firm’s analysis of the company’s potential to navigate funding reforms in Germany and capitalize on cost reduction initiatives in the United States, along with synergies from recent Swiss acquisitions.
Goldman Sachs acknowledges that funding reforms in Germany present a challenge to growth, but they do not anticipate any surprises for investors, given the industry’s resilience in dealing with previous reimbursement cuts. The analyst points out that Sonic Healthcare’s track record suggests it can manage these headwinds effectively.
In the United States, Sonic Healthcare’s cost reduction strategies are expected to contribute positively to the company’s earnings. Additionally, the integration of Medisyn & Dr Risch Group, two Swiss companies recently acquired by Sonic Healthcare, is projected to create further earnings benefits. These synergies are anticipated to help the company’s earnings surpass the Visible Alpha Consensus, with an expected increase of 6% in FY25 EPS consensus.
The analysis from Goldman Sachs also includes insights from channel checks, which reveal significant opportunities for efficiency improvements within the acquired Swiss businesses. The consolidation of laboratory equipment brands is highlighted as a key area where these efficiencies can be achieved.
Goldman Sachs’ coverage initiation and optimistic outlook for Sonic Healthcare come at a time when the healthcare industry is facing various challenges globally. The company’s ability to implement cost-saving measures and integrate acquisitions effectively is crucial for its future performance.
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