Jefferies is out with a wonderful call on Inverness Medical (NYSE:IMA) following a recent investor conference call with CEO Ron Zwanziger and CFO David Teitel.
Firm notes there was active participation from accounts and questions primarily focused around the pending acquisition of Matria, IMA's strategy in disease management, 4Q results, and the discrepancy in Street estimates for 2008 and beyond.
Jeffco notes that based on management's lack of providing guidance the Street now has EPS estimates for 2008 and 2009 that range from $1.56-$2.01 and $2.20-$3.32, respectively. Furthermore, many Sell side analysts have asserted that they have vetted their estimates with management (with a wide range of forecasts) and therefore they believe that management needs to provide directional guidance to subdue investor's concerns over what IMA's true earnings power is for 2008 and beyond (expects guidance to be provided in an 8-K this week).
Firm maintains belief that their 2008 and 2009 estimates of $1,373.9MM and $2.51 and $1,557.6MM and $3.32 are still conservative and echo comments made my IMA management on their conf call about their disappointment with other analyst's estimates.
Jeffco believes that IMA has become very attractive to potential acquirers at these levels. On the conference call, Mr. Zwanziger stated that IMA does not have a poison pill in place and that IMA's board would be amenable to entertaining take out offers and management has even considered doing an LBO at these levels. Jeffo notes that in 2007 Dade Behring was purchased at a multiple of ~4.1x trailing twelve month (TTM) sales and 15.0x TTM EBITDA, Biosite was taken out at 5.1x TTM sales and 13.0x TTM EBITDA, and Ventana was acquired at ~11.3x TTM sales and ~26.0x TTM EBITDA. They believe that based on any of these prementioned metrics, IMA is grossly undervalued at current levels.
They believe that there are numerous upcoming catalyst for IMA. First, providing 2008 guidance expected in the next week or two, second, CMS' national coverage determination to expand reimbursement for home INR testing to include atrial fibrillation and venous thrombosis patients should be finalized in March 2008.
Reiterates Buy and $70 target.
Notablecalls: What a beautiful call. IMA has been absolutely destroyed and I think this is the call that will make it bounce in the near term. The call has it all:
- Positive management comments
- Catalysts (guidance, CMS)
- Destroyed stock.
Buy IMA today. It's going higher now. Actionable Call Alert!