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On Tuesday, Stifel analysts adjusted their outlook on Elanco Animal Health (NYSE:ELAN), reducing the price target from $16.00 to $15.00 while sustaining a Buy rating for the stock. Currently trading at $10.70, near its 52-week low of $10.20, the stock appears undervalued according to InvestingPro analysis, which identifies several positive indicators including strong liquidity and growth potential. The decision followed Elanco’s recent financial disclosures and market performance, which included both positive and negative aspects according to Stifel’s analysis.
The company’s fourth quarter of 2024 gross margins fell short of expectations, though InvestingPro data shows a healthy gross margin of 54.74% over the last twelve months. The 2025 EBITDA forecast was impacted by a larger-than-anticipated currency exchange hit, following the company’s current EBITDA of $875 million. Additionally, the year-end 2025 leverage target was negatively revised, also affected by foreign exchange rates. These factors contributed to the stock’s lackluster response, despite the market conditions that saw a difficult day for med-tech stocks overall.
Despite these challenges, Elanco also reported several positive outcomes that the analysts highlighted. The company’s fourth-quarter 2024 revenue surpassed expectations, and the U.S. adoption rate of Zenrelia, a product in their portfolio, was noteworthy. Furthermore, Elanco’s guidance for 2025 revenue was promising, indicating an expected organic constant currency revenue growth of 4-6%, which is an acceleration from the 3% growth seen in 2024 and surpasses the analysts’ previous estimate of 3.6%.
Stifel’s commentary also emphasized the potential for margin expansion in 2026. The firm expressed a belief that if Elanco’s management meets these growth targets, the stock price is likely to rise. They also noted that Elanco’s business could benefit from insulation against potential disruptions in Washington D.C., such as tariffs or legislation, which could provide an advantage in the currently volatile med-tech sector.
In other recent news, Elanco Animal Health reported its fourth-quarter 2024 earnings, revealing a mixed performance. The company posted an earnings per share (EPS) of $0.14, which missed the forecasted $0.15, but the revenue exceeded expectations, reaching $1.02 billion against the anticipated $1.01 billion. For the full year, Elanco achieved a revenue of $4.4 billion, with an adjusted EBITDA of $910 million, reflecting a slight increase from the previous year. The company continues to focus on product innovation and debt reduction as part of its strategic initiatives. Analysts have noted Elanco’s guidance for 2025 remains optimistic, with anticipated revenue growth and adjusted EBITDA growth between 1% and 5%. Additionally, Elanco plans to expand its manufacturing capabilities and focus on high-potential product lines. The company’s net debt stands at $3.88 billion, with a leverage ratio of 4.3 times. Elanco’s CEO, Jeff Simmons, expressed confidence in the company’s trajectory, emphasizing expectations for sustained growth over time.
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