Getinge Earnings: Improved Production Leads to More Recovery and a Boost to Our Fair Value Estimate

Narrow-moat Getinge GETI B reported third-quarter earnings above our expectations. We are increasing our fair value estimate to SEK 247 from SEK 221, as Getinge is executing a turnaround in its acute care therapies offerings faster than we had expected. Shares remain undervalued, in our view. Organic net sales rose 5.7% year over year, mainly driven by the increased delivery of cardiac assist consumables. While the production and regulatory challenges associated with Getinge’s cardiac assist and cardiopulmonary products are unlikely to be fully resolved until mid-2024, we are encouraged to see continued progress mitigating top-line pressure in the acute care therapies segment.

Getinge maintained its effort to navigate production and regulatory challenges from previous quarters, leading to a few breakthroughs, namely resuming global deliveries of intra-aortic balloons, and reinstating the CE certificate of intra-aortic balloon pumps. We believe Getinge is on the right track to restore its delivery pipeline, though backlogs are still an issue near term. Despite progress with cardiac assist products, Getinge is troubled by the development of new cardiopulmonary packaging solutions, and we remain cautious about management’s goal to deliver new packaging resolutions in 2024.

We think Getinge’s acquisition of Healthmark this quarter is a sound move to expand its sterilization portfolio. With roughly 90% of sales originating from the U.S., Healthmark could help Getinge establish a stronger presence in the ever-growing U.S. surgical workflows market. Also, in addition to the $30 million cost reduction over five years, Healthmark’s packaging and cleaning verification products complement Getinge’s existing consumable offerings. Going forward, we believe other acquisitions in the sterilization space are possible given Getinge’s healthy financial position and surgical workflows’ rapid growth.