Citigroup analyst Alex Smith says Sonic Healthcare can’t rely on the US for top and bottom line growth.
“The second quarter earnings of Quest and Labcorp show organic volume growth remains weak in the US pathology market, prices are declining,” says Smith. “This is expected to continue for the foreseeable future (and) Sonic needs significant cost reductions to offset these headwinds.”
Sonic Healthcare is trading at about 15 times earnings. That’s too expensive, says Smith. He is “cautious” on the stock and doesn’t recommend investors buy it or sell it.
At 1320 AEST Sonic Healthcare shares were up 16 cents, or 1.1 per cent, to $14.60, after earlier rising as high as $14.65. The stock has gained 16 per cent in the last 12 months and is up 9.5 per cent this year. The S&P/ASX200 Index is up 22 per cent in the last 12 months and 7.9 per cent this year.