UBS Initiates Getinge Coverage at 'Neutral,' Citing Limited Upside as Quality Issues Priced In

UBS has initiated coverage on Swedish medical equipment manufacturer Getinge AB with a Neutral rating and a price target of 255 Swedish crowns (SEK). The bank's analysts argue that the company's shares are now valued as if its long-standing quality issues are fully resolved, leaving limited upside for investors.

Valuation Reflects Recovery

According to the UBS note, the market appears to have already priced in a complete resolution of Getinge's quality challenges. This is reflected in the company's valuation discount to its European Medtech peers, which has narrowed significantly from as high as 40% since 2015 to a range of 10%-20% in recent years. This trend is consistent with other Medtech firms that have operated under consent decrees with U.S. regulators.

UBS stated that its financial estimates for Getinge are broadly aligned with consensus expectations, further supporting the neutral stance. The bank also noted that investor focus has shifted from remediation to growth, citing a more than 90% drop in mentions of the company's 2015 consent decree on earnings calls since that year.

Growth Outlook and Lingering Costs

Looking ahead, UBS forecasts Getinge will achieve a compound annual growth rate (CAGR) of 5% for revenue and 12% for earnings-per-share (EPS) between 2026 and 2030. This projected growth, an improvement on past performance, is expected to be driven by a portfolio shift toward higher-growth categories like transplant care and ECMO/ECLS, which are anticipated to grow from under 30% of sales in 2025 to nearly 35% by 2030.

Ad

However, the bank highlighted the lingering financial impact of the company's quality remediation efforts. Getinge entered into a consent decree with the U.S. Food and Drug Administration (FDA) in 2015 following inspections of its manufacturing facilities. UBS estimates that the associated remediation costs have consumed almost 20% of the company's cumulative free cash flow since 2015. Even with improvements, these extraordinary quality costs are projected to remain around 400 million crowns by 2029-2030, representing 8%-9% of forecast free cash flow.

Price Target Scenarios

UBS's SEK 255 price target is derived from a discounted cash flow (DCF) model and implies the stock would trade at 20.0 times its estimated 2026 earnings. The bank considers this a fair premium over the broader Medtech sector, given Getinge's higher projected EPS growth rate.

The bank outlined potential scenarios for the stock's performance:

• Base Case (SEK 255): Achieved if Getinge sustains growth in its key accelerator categories while its lower-growth segments stabilize, implying a 6.0% revenue CAGR.
• Downside Case (SEK 180): Could occur if the company faces tougher competition, particularly from Chinese rivals, or if growth in key areas is slower than expected, resulting in a 2.5% revenue CAGR.