Boston, MA 08/11/2014 (wallstreetpr) – A global medical technology company, CareFusion Corporation (NYSE:CFN) shares price objective has been revisited by investment advisor Goldman Sachs Group Inc (NYSE:GS) after the company had announced its financial numbers for the fourth quarter on August 7 after the market closed. However, the brokerage preferred to retain the rating on the stock.
Price Tag Boosted
Goldman Sachs Group Inc (NYSE:GS) had lifted its one-year price target to $47 from $45, which represents 4.4% increase, on the shares of CareFusion based on higher estimates derived from estimated earnings per share for the fiscal year 2015 and discounted cash flow. The revised price objective indicates a potential uptick in share price of 10.6% based on Friday’s closing price of $42.49.
The brokerage thinks that the fourth quarter results were an important factor since it came after multiple disappointments on earnings during the first part of the fiscal year 2014. Moreover, the company’s forward earnings per share growth were slightly above Goldman Sachs and Street consensus.
Following this, analyst David Roman had updated his model for revenue mix, as well as, growth objectives, EBIT margins, and share buy back apart from cash flow assumptions. He said these revisions have allowed him to lift 3% – 7% in his estimations for the fiscal year 2015 – 2017.
Rating Of Stock
The brokerage viewed that CareFusion’s long-term targets were reasonable with Goldman Sachs revised sales outlook growing 4% between the fiscal years 2015 and 2017 and the earnings per share growing at 12% during the same period. The analyst believes that this growth places the company in line with the matured big cap MedTech space.
David Roman said that currently CareFusion Corporation (NYSE:CFN) is trading at a small discount of 4.5% on the estimated CY15. He thinks that the risk/rewards were relatively balanced though favorably biased due to its forward view on growth path. Therefore, he retained his rating Neutral on the company’s shares.
Comments On 4Q Results
Goldman Sachs Group Inc (NYSE:GS) said that CareFusion’s $1.12 billion sales in the fourth quarter were higher by 8% over the brokerage’s estimations and 9% more than the Street consensus. The earnings per share also came in 14% more than its estimations and 10% over consensus.
The brokerage felt that the weak gross margins and higher selling, general and administration were partly compensated by the fall in research and development, fuelling a 2.1 percentage points EBIT margin shortfall compared to Goldman Sachs. CareFusion Corporation (NYSE:CFN) blamed capital installations costs and incentive compensation for EBIT margin pressure. For the first time, the company had also introduced 3-year EPS growth uptick between 10% and 12%, fiscal year earnings per share forecast of $2.60 – $2.75 compared to the consensus’ $2.68, and share buyback program of $750 million.
