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On Wednesday, Piper Sandler adjusted its price target for Viatris (NASDAQ:VTRS), a global healthcare company, reducing it to $10 from the previous $14 while maintaining a neutral stance on the stock. The revision followed a recent dinner event where Piper Sandler analysts had the opportunity to engage with Viatris’ senior leadership and investors, gaining insights into the company’s operational challenges. The stock, which has declined nearly 25% year-to-date and is trading near its 52-week low of $8.77, appears undervalued according to InvestingPro analysis.
The analysts reported that the discussion provided a clearer picture of the issues Viatris is facing at its manufacturing facility in Indore, India. With a current EV/EBITDA ratio of 5.44x and an attractive free cash flow yield of 18%, the stock’s valuation metrics suggest potential value. The company also offers a significant dividend yield of 5.12%, though the analysts expressed a continued cautious outlook. InvestingPro subscribers can access 8 additional key insights about Viatris’s financial health and growth prospects.
Piper Sandler highlighted that while the manufacturing problems might be resolvable, the absence of a definite growth catalyst for Viatris poses a concern. The lack of potential drivers such as successful innovative brand assets or a significant uptick in the U.S. generics business could mean that the stock may not see substantial movement in the near term.
The firm reiterated its neutral rating on Viatris shares, indicating that while the company’s stock may seem undervalued, the uncertainties surrounding its growth prospects warrant a conservative approach. Piper Sandler’s revised price target reflects these considerations and the current market conditions impacting Viatris.
In other recent news, Viatris Inc. reported its fourth-quarter earnings for 2024, which fell short of analyst expectations. The company posted an earnings per share (EPS) of $0.54, missing the forecasted $0.58, while revenue came in at $3.52 billion, below the projected $3.62 billion. This performance highlights ongoing challenges, despite a 2% year-over-year increase in total revenues to $14.7 billion and a strong adjusted EBITDA of $4.7 billion. S&P Global Ratings downgraded Viatris’ corporate credit rating to ’BB+’ from ’BBB-’ due to anticipated financial pressures, including a significant impact from an FDA warning letter concerning its Indore, India manufacturing facility. The downgrade reflects elevated leverage expectations, which could strain the company’s EBITDA by $350 million to $400 million. Despite these setbacks, Viatris continues to generate over $2 billion in annual free cash flow, allowing for debt reduction and product pipeline enhancement. The company plans to focus on debt reduction and cost optimization, while also anticipating a slight revenue decline in 2025. S&P maintains a stable outlook for Viatris, expecting leverage to remain between 3.5x and 4.0x over the next year, with hopes for sustained revenue growth in 2026.
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