On Wednesday, Citi upgraded shares of Quidel Corp (NASDAQ:QDEL) from Neutral to Buy, raising the price target to $50 from the previous $44. The firm cites improved management execution, particularly in cost reduction and adjusted EBITDA margin rebuilding, as well as a valuation that is seen as attractive when compared to the company's history and its peers. Currently trading at $38.50, the stock appears undervalued according to InvestingPro analysis, with analyst targets ranging from $38 to $64.
Quidel has experienced significant changes over the past year, including the replacement of the previous CEO and other key management positions. The new CEO, Brian Blaser, has been credited with accelerating restructuring efforts to realign costs and improve profit margins.
During the third quarter of 2024, Quidel reported a revenue beat of $85 million and an adjusted EBITDA margin beat of 370 basis points, driven by strength in the Labs and Transfusion Medicine businesses, as well as higher respiratory revenue than anticipated. InvestingPro data shows the company maintains a healthy current ratio of 1.38, though it operates with significant debt, as revealed in one of several exclusive ProTips available to subscribers.
The company has also reinstated its FY24 guidance, projecting $2.75 to $2.80 billion in sales, which would represent a year-over-year decline of 8.3% to 6.6%, and an adjusted EBITDA margin between 19.3% and 19.6%, reflecting a year-over-year decline of 480 to 450 basis points. The decline in sales and margins is primarily attributed to the decrease in point-of-care COVID testing, which had previously contributed to higher than average corporate margins.
Despite current challenges, InvestingPro analysts predict a return to profitability this year. For detailed analysis and more insights, investors can access the comprehensive Pro Research Report, available for over 1,400 US stocks including Quidel.
Despite the lower than initially expected performance for FY24, Citi believes that the new management's strategy and commitment to margin improvement position Quidel favorably for FY25.
The benefits of the cost-saving actions initiated in the second half of 2024 are expected to materialize and contribute to the company's financial health in the following year. With a gross profit margin of 47.57% and an EBITDA of $586.5 million in the last twelve months, the company shows potential for recovery.
In other recent news, QuidelOrtho Corporation reported third-quarter earnings for 2024, revealing a revenue of $727 million and an adjusted EBITDA of $171 million. The company's adjusted diluted earnings per share (EPS) was reported at $0.85.
For the full year of 2024, QuidelOrtho expects a revenue between $2.75 billion and $2.80 billion, and an adjusted diluted EPS between $1.69 and $1.91. These results come amidst leadership changes, including Jonathan Siegrist as the new CTO and Lee Bowman as CHRO, as the company targets a $100 million cost savings by mid-2025.
Furthermore, Jefferies initiated coverage on Quidel with a Hold rating and a $43 price target, acknowledging the company's ongoing financial performance improvement efforts. The firm noted Quidel's significant debt burden, but also projected net income growth for the year.
Lastly, QuidelOrtho's CFO, Joseph M. Busky, experienced a significant increase in his base salary, reflecting his expanded role and new IT duties. The company's board of directors confirmed this increase from $586,328 to $680,000, aligning compensation with the scope of executive duties.
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