Sonic has updated on the US business, noting, while pressures exist, there has been substantial earnings growth. Organic volume growth has been 1.9% in the five months to November. The company confirmed FY14 guidance.
Citi thinks, while the guidance is positive, it may be optimistic. The broker believes, if current conditions continue in the second half and FY15, there is 8% downside to consensus forecasts and investors should seek appropriate discount for this risk.
Citi maintains Sonic is fair value relative to its growth profile and retains a Neutral rating and $15.26 price target.
Sector: Health Care Equipment & Services.
Target price is $15.26.Current Price is $15.76. Difference: ($0.50) – (brackets indicate current price is over target). If SHL meets the Citi target it will return approximately -3% (excluding dividends, fees and charges – negative figures indicate an expected loss).