Upgrades For Sonic

At its annual general meeting yesterday pathology group Sonic Healthcare (SHL) reiterated FY11 earnings guidance, which implies net profit after tax growth of 5-15% in constant currency terms. This guidance excludes the impact of any acquisitions made during the period.

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SHL – Citi rates the stock as Hold, Medium Risk

Regard this as an official warning: further research has taught Citi analysts that competition in Australia’s diagnostic services sector is more intense than previously believed. This means profit margins for the players inside the industry will likely suffer more. The analysts don’t believe this realisation has trickled through in Mr Market’s mind to the full extent.

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Sonic Healthcare Eyeing German Expansion

For those companies with the money to spend on acquisitions the global financial crisis has opened up a range of opportunities, as potential purchases are now valued at far less than was the case prior to the downturn. As an example, Southern Cross Equities points to Sonic Healthcare (SHL), as it estimates potential acquisitions that were trading on 8-9 times EBITDA (earnings before interest, tax, depreciation and amortisation) are now available for around 5-6 times.

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