ConvaTec's Acquisition of Cure Medical Bolsters Continence-Care Business; No Change to Our FVE

ConvaTec reported second-quarter sales that largely met our expectations, and based on first-half financial results, the firm is on track for our full-year projections. We're leaving our fair value estimate unchanged. In a show of fortuitous timing, ConvaTec’s performance improved in the first few quarters after Karim Bitar assumed the CEO role. We had a hard time attributing those positive results to Bitar at the time and believed they were more likely the result of whatever his predecessor was able to implement before leaving. Then, the pandemic took over as a disruptive factor in 2020. The most recent quarter is the first that we think captures a more normal state for ConvaTec currently. Importantly, management’s methodical analysis and formulation of strategy, which is now still in the relatively early stages of implementation, give us confidence that the appropriate foundational work is being done to put ConvaTec on stronger competitive footing. Nonetheless, these building blocks may take some time, which means we could see some fits and starts from quarter to quarter in the near term.