Company Reports

Sweden-based medical device and sterilization company Getinge has struggled through roughly a decade of operational and reputational challenges. The firm remains focused on improving operating efficiency, addressing product quality, and building back trust with customers and regulators. As part of this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Regulatory challenges remain a risk, and in 2023 we estimate it spent approximately SEK 800 million in quality spending related to its cardiopulmonary and cardio assist businesses. Nonetheless, we think Getinge could maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and gradually improve margin with a focus on U.S. market expansion and cost restructuring.

Narrow-moat Getinge reported first-quarter results that were in line with our expectations and management reiterated its full-year guidance of 2%-5% organic sales growth. The company also plans to hold an informal update on May 15, which should offer some updated views on the growth trajectories of its end markets and additional color about its cost structure. We maintain our fair value estimate of SEK 236 per share and view shares as fairly valued.

We are refreshing our views on Getinge and reiterate our narrow moat rating. We continue to believe its overall business is moatworthy due to the high customer switching costs in its various sterilization businesses and the razor-and-blade nature of certain products in acute care therapies. Despite near-term uncertainty in profit margins, which are mostly caused by quality improvement spending for cardiopulmonary and cardio assist products, we believe the company should be able to modestly improve its margins once these are resolved. We lower our fair value estimate to SEK 236 from SEK 247 due to slightly lower profit margins and higher capital expenditure.

Sweden-based medical device and sterilization company Getinge has struggled through roughly a decade of operational and reputational challenges. The firm remains focused on improving operating efficiency, addressing product quality, and building back trust with customers and regulators. As part of this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Regulatory challenges remain a risk, and in 2023 we estimate it spent approximately SEK 800 million in quality spending related to its cardiopulmonary and cardio assist businesses. Nonetheless, we think Getinge could maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and gradually improve margin with a focus on U.S. market expansion and cost restructuring.

Narrow-moat Getinge reported mixed fourth-quarter results with robust top-line growth exceeding our expectations and a moderate margin decline. We are maintaining our SEK 247 fair value estimate as incremental revenue growth from recent acquisitions is offset by our lower expected margin expansions. We think the 12% stock price decline following the earnings announcement is an overreaction to Getinge’s near-term margin pressures. In the long term, Getinge’s narrow moat remains intact as the massive installation base among sterilization and life sciences customers supports the company’s high switching costs.

Sweden-based medical device and sterilization company Getinge has struggled through roughly a decade of operational and reputational challenges. The firm remains focused on improving operating efficiency, addressing product quality, and building back trust with customers and regulators. As part of this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Although additional regulatory challenges remain a risk, we think Getinge could maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and slowly improve margin with a focus on U.S. market expansion and cost restructuring.

Sweden-based medical device and sterilization company Getinge has struggled through nearly a decade of operational and reputational challenges. The firm remains focused on improving operating efficiency, addressing product quality, and building back trust with customers and regulators. As part of this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Although additional regulatory challenges remain a risk, we think Getinge could maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and slowly improve margin with a focus on U.S. market expansion and cost restructuring.

Narrow-moat Getinge 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’s second-quarter results were hurt by ongoing regulatory and quality issues in the acute care therapies segment, but on the whole, quarterly revenue shortfalls weren’t as bad as we’d been expecting, while the impact on profitability was greater than we’d estimated. As a result, we’re leaving our fair value estimate unchanged after moderating the anticipated decline in acute care revenue for the full year, which was offset by steeper-than-expected margin declines. Despite all the near-term disruption, we see little that threatens Getinge’s narrow economic moat, which really stems from the switching costs associated with the sterilization business.

Getinge’s recent litany of regulatory, quality, and supply chain troubles across multiple products provides us with a flashback to 2013-2015 when similar issues culminated in a consent decree by the U.S. Food and Drug Administration. We've lowered our fair value estimate to SEK 221 per share, down from SEK 260, as we don’t anticipate Getinge can fully resolve these issues until later in 2024. Moreover, considering the firm’s spotty record on execution, we wouldn’t be surprised to see another warning crop up between now and 2024. Considering Getinge’s performance over the last decade, we cast a skeptical eye on this firm’s ability to transform itself into an operator where hiccups are the exception rather than the rule. Despite the new missteps, we’re holding steady on Getinge’s narrow economic moat, which stems from its sterilization business and other equipment with high switching costs that haven’t changed in our view. Nonetheless, we’re eyeing the rest of Getinge carefully, and if the other businesses move into value-destruction mode, we would entertain a downgrade to Getinge’s moat.

Sweden-based medical device and sterilization company Getinge has struggled through nearly a decade of operational and reputational challenges. The firm remains focused on improving operating efficiency, addressing product quality, and building back trust with customers and regulators. As part of this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Although additional regulatory challenges remain a risk, we think Getinge could maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and slowly improve margin with a focus on U.S. market expansion and cost restructuring.

Narrow-moat Getinge posted solid first-quarter results. Management reiterated its full-year guidance provided in the fourth quarter of 2%-5% organic top-line growth. Based on the strong start to the year, the firm looks likely to push toward the top of that guidance range, in line with our forecast. We maintain our fair value estimate of $260 per share.

Sweden-based medical device and sterilization company Getinge has managed through several years of operational and reputational challenges. With its darkest days behind it, the company is focused on improving operating efficiency and building back trust with customers. As part of this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Although additional regulatory challenges remain a risk, we think Getinge should maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and slowly improve margin with a focus on U.S. market expansion and cost restructuring.

Sweden-based medical device and sterilization company Getinge has managed through several years of operational and reputational challenges. With its darkest days behind it, the company is focused on improving operating efficiency and building back trust with customers. To accomplish this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Although additional regulatory challenges remain a risk, we think Getinge is set to maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and slowly improve margin with a focus on U.S. market expansion and cost restructuring.

Getinge ended the year on a softer note this quarter across revenue and margins. Based on preliminary sales results, Getinge appears to be taking longer to recover than some other medical device makers. The softness in the quarter may be an irregularity, and we will monitor the next quarter carefully for any potential trend improvement. As we gain more details on near-term prospects, we may reassess our current projections. For now though, we are leaving our fair value estimate unchanged.

Narrow-moat Getinge posted moderate third-quarter results against a strong comparison period and amid persistent component shortages. Though we are confident in the firm's competitive position, demand at the industry level is sensitive to uncertainties in the healthcare labor market. With this in mind we are lowering our fair value estimate to SEK 260 per share from SEK 274.

Sweden-based medical device and sterilization company Getinge has managed through several years of operational and reputational challenges. With its darkest days behind it, the company is focused on improving operating efficiency and building back trust with customers. To accomplish this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Although additional regulatory challenges remain a risk, we think Getinge is set to maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and slowly improve margin with a focus on U.S. market expansion and cost restructuring.

Sweden-based medical device and sterilization company Getinge has managed through several years of operational and reputational challenges. With its darkest days behind it, the company is focused on improving operating efficiency and building back trust with customers. To accomplish this turnaround, Getinge has committed nearly SEK 2 billion to remediation and restructuring related to the 2015 consent decree imposed by the U.S. Food and Drug Administration and about SEK 1.8 billion in provisions for surgical mesh liability costs. The firm also sold its entire extended-care business in 2017. Although additional regulatory challenges remain a risk, we think Getinge is set to maintain a strong position in key markets (such as life science sterilization, advanced ventilators, and surgical capital equipment) and slowly improve margin with a focus on U.S. market expansion and cost restructuring.

Narrow-moat Getinge had a difficult second quarter, with sales and margin declining year over year. However, this was not unexpected, considering the guidance update on June 14, and we maintain our SEK 274 fair value estimate.

Narrow-moat Getinge's first quarter was materially affected by supply chain challenges, which delayed 5% of all sales, though there was little in the earnings release that changes our long-term view. We are keeping our SEK 274 fair value estimate in place. Shares now look fairly valued following a post-earnings decline, which we see as an overreaction to the quarterly top line and margin miss (compared with FactSet consensus expectations).