Company Reports

No-moat ICU Medical reported fourth-quarter results in line with our expectations. However, we are trimming our fair value estimate to $161 per share from $177 because of lower-than-expected 2024 guidance from management. ICU’s integration with Smiths Medical is taking longer than our original projection, but we remain optimistic about the potential cost-saving synergies in the long term.

With roots as a supplier of infusion consumables, ICU Medical enhanced its product mix through the transformative acquisition of Hospira Infusion Systems from Pfizer in 2017 by bringing infusion pumps, a broader consumables offering, and intravenous solutions manufacturing into the fold. The firm has become a more complete provider with the acquisition of Smiths Medical (various IV-related products and other medical supplies) in 2022. In our view, ICU’s focus on building a more comprehensive portfolio adds to the long-term stability of its revenue mix thanks to lengthy contracts and a hallmark razor-and-blade model in its systems business. We think unrivaled scale in consumables may help it to generate excess returns eventually, though its portfolio has lost differentiation. In infusion systems, although we believe ICU faces an uphill battle in competing with leader Becton Dickson, we believe the space offers an attractive opportunity to exploit high switching costs.

No-moat ICU Medical’s third-quarter results were largely in line with our expectations. Adjusted total sales declined by 6% year over year in constant currency, but gross margin expanded 100 basis points on an adjusted basis. Management attributed the top-line decline to the weak performance of acquired products from Smiths, and we believe the operational glitches related to the Smiths acquisition are mostly short-term.

No-moat ICU Medical turned in a mixed second quarter with weaker-than-expected sales but strong profits. Negatively for 2023, management suggested that sales would be weaker than previously expected in a couple businesses and narrowed its guidance range for profits mildly below our previous expectations. However, making a slight cut to our 2023 view does not materially change our $177 fair value estimate, and we continue to view ICU shares as about fairly valued.

We are reducing ICU's moat rating to none, down from narrow, largely to account for uncertainty around the firm's economic profitability related to the Smiths acquisition. In conjunction, we have raised our Uncertainty Rating to High from Medium. The moat reduction shortens our modeled length of economic profitability, which brings our fair value estimate to $177 per share, down from $195 previously.

With roots as a supplier of infusion consumables, ICU enhanced its product mix through the transformative acquisition of Hospira Infusion Systems from Pfizer in 2017 by bringing infusion pumps, a broader consumables offering, and IV solutions manufacturing into the fold. The firm has become a more complete provider with the acquisition of the Smiths Medical division (various IV-related products and other medical supplies) in 2022. In our view, ICU’s focus on building a more comprehensive portfolio adds to the long-term stability of its revenue mix thanks to lengthy contracts and a hallmark razor-and-blade model in its systems business. We think unrivaled scale in consumables may help it to generate excess returns eventually, though its portfolio has lost differentiation. In infusion systems, although we believe ICU faces an uphill battle in competing with leader Becton Dickson, we believe this space offers an attractive opportunity to exploit high switching costs in this industry.

Narrow-moat ICU Medical posted solid first-quarter results buoyed by strong healthcare utilization in the U.S. and a somewhat favorable comparison period in the pumps business. Overall, the company looks on track to meet (or even exceed) our 2023 expectations, and we retain our long-term optimism on margins once the Smiths business turns around and certain infrastructure integrations are completed. At first glance, we do not expect to change our fair value estimate of $195 per share based on this announcement.

With roots as a supplier of infusion consumables, ICU enhanced its product mix through the transformative acquisition of Hospira Infusion Systems from Pfizer in 2017 by bringing infusion pumps, a broader consumables offering, and IV solution manufacturing into the fold. The firm has become a more complete infusion and IV provider with the acquisition of the Smiths Medical division (various IV-related products and other medical supplies) in 2022. In our view, ICU’s focus on building a more comprehensive portfolio adds to the long-term stability of its revenue mix thanks to lengthy contracts and a hallmark razor-and-blade model in its systems business. We think unrivaled scale in consumables allows ICU to offer rock-bottom prices that competitors would be hard-pressed to beat and gives us confidence in the firm's ability to generate excess returns over the coming decade. In IV systems, although we believe ICU faces an uphill battle in competing with leader Becton Dickson, we believe this space offers an attractive opportunity to exploit high switching costs in this industry.

Narrow-moat ICU Medical’s full-year revenue came in just slightly higher than our estimate due to good fourth-quarter results from Smiths Medical and margins roughly as expected. We reiterate there is a strong runway for growth and margin improvement in the next few years for the newly combined firm. Also, while 2023 guidance looks slightly weaker than anticipated, at first glance, we expect to maintain our $195 fair value estimate.

Narrow-moat ICU Medical posted strong top-line results in its third quarter but soft margins. After a sharp cut to guidance last quarter, management reaffirmed adjusted EPS guidance of between $6.20-$6.80, now guiding toward the lower end. Considering these trends, we are lowering our fair value estimate to $195 per share from $207. We view this name as undervalued. After the firm posted disappointing results last quarter, lackluster growth and declining margins raised many questions around the Smiths acquisition. After this quarter, our worst concerns have been largely alleviated.

With roots as a supplier of infusion consumables, ICU enhanced its product mix through the transformative acquisition of Hospira Infusion Systems from Pfizer in 2017 by bringing infusion pumps, a broader consumables offering, and IV solution manufacturing into the fold. The firm has become a more complete infusion and IV provider with the acquisition of the Smiths Medical division (various IV-related products and other medical supplies) in 2022. In our view, ICU’s focus on building a more comprehensive portfolio adds to the long-term stability to its revenue mix thanks to lengthy contracts and a hallmark razor-and-blade model in its systems business. We think unrivaled scale in consumables allows ICU to offer rock-bottom prices that competitors would be hard-pressed to beat and gives us confidence in the firm's ability to generate excess returns over the coming decade. In IV systems, although we believe ICU faces an uphill battle in competing with leader Becton Dickson, we believe this space offers an attractive opportunity to exploit high switching costs in this industry.

With roots as a supplier of infusion consumables, ICU enhanced its product mix through the transformative acquisition of Hospira Infusion Systems from Pfizer in 2017 by bringing infusion pumps, a broader consumables offering, and IV solution manufacturing into the fold. The firm has become a more complete infusion and IV provider with the acquisition of the Smiths Medical division (various IV-related products and other medical supplies) in 2022. In our view, ICU’s focus on building a more comprehensive portfolio adds to the long-term stability to its revenue mix thanks to lengthy contracts and a hallmark razor-and-blade model in its systems business. We think unrivaled scale in consumables allows ICU to offer rock-bottom prices that competitors would be hard-pressed to beat and gives us confidence in the firm's ability to generate excess returns over the coming decade. In IV systems, although we believe ICU faces an uphill battle in competing with leader Becton Dickson, we believe this space offers an attractive opportunity to exploit high switching costs in this industry.

ICU Medical posted mixed second-quarter financials but made significant adjustments in its full-year guidance. Accounting for the challenges ICU faces with Smiths Medical in the foreseeable future, we expect to lower our $239 fair value estimate by the high single digits on a percentage basis at first glance.

Narrow-moat ICU Medical reported solid first-quarter performance from its legacy business, but undesirable results from the recently acquired Smiths Medical. Quarterly results appeared in line with FactSet consensus, and at first glance, we are keeping our fair value estimate intact, although we recognize problems with the Smiths Medical assets could add some uncertainty around near-term cash flows.

Narrow-moat ICU Medical reported solid performance in the fourth quarter, and at first glance, we expect to maintain our $239 fair value estimate. In constant currency, quarterly revenue grew 7% year over year. We believe a large part of this growth was due to temporary demand from omicron surge-related hospitalizations and medical supply shortages, which should recede in 2022. Also, we are optimistic about the Smiths Medical integration, considering ICU's demonstrated success integrating Hospira Infusion Systems.

Narrow-moat ICU Medical generated strong third-quarter results, propelled by high order volume partially due to supply chain concerns among its buyers. On the call, management predicted that this year’s profits as measured by EBITDA and adjusted EPS will be toward the upper ends of its previous guidance ranges, or roughly in line with our expectations. At first glance, we plan to maintain our $239 fair value estimate, and we continue to see the shares as about fairly valued.

With roots as a supplier of infusion consumables, ICU enhanced its product mix through the transformative acquisition of Hospira Infusion Systems from Pfizer in 2017 by bringing infusion pumps, a broader consumables offering, and IV solution manufacturing into the fold. The firm will become a more complete infusion and IV provider upon its expected acquisition of the Smiths Medical division (various IV-related products and other medical supplies) in 2022. In our view, ICU’s focus on building a more comprehensive portfolio adds to the long-term stability to its revenue mix thanks to lengthy contracts and a hallmark razor-and-blade model in its systems business. We think unrivaled scale in consumables allows ICU to offer rock-bottom prices that competitors would be hard-pressed to beat and gives us confidence in the firm's ability to generate excess returns over the coming decade. In IV systems, although we believe ICU faces an uphill battle in competing with leader Becton Dickson, we believe this space offers an attractive opportunity to exploit high switching costs in this industry.

Narrow-moat ICU Medical announced plans to acquire narrow-moat Smiths Group’s Medical division for $2.35 billion in enterprise value in a transaction expected to close in the first half of 2022. We believe the acquisition will be substantially accretive for ICU, and shares have risen over 30% in intraday trading. At first glance, we expect to significantly raise our fair value estimate too, and we are placing ICUI under review as we rework our model to account for the acquisition.

Narrow-moat ICU Medical reported stable second-quarter results, in line with our expectations. Revenue grew by 8% year over year (5% removing currency impact). Management raised the bottom-end of its adjusted EPS guidance to $6.80 to $7.20 for 2021 from $6.50 to $7.20 previously. Our 2021 estimate remains in the middle of that range, and we are maintaining our fair value estimate of $190 per share, even after incorporating a higher U.S. corporate tax rate in 2022 and beyond due to potential U.S. tax policy changes.

Narrow-moat ICU Medical’s first-quarter results were largely in line with our expectations, posting a sequential revenue decline of 1%. Based on these results, we do not anticipate changing our $190 per share fair value estimate for the company at first glance. Shares still appear moderately overvalued to us.