RBC Capital upgrades UDG Healthcare to 'outperform'

(Sharecast News) - RBC Capital Markets upgraded its rating on shares of UDG Healthcare on Wednesday to 'outperform' from 'sector perform' and hiked the price target to 880p from 800p, saying it was "time to get more positive".
RBC put the upgrade down to UDG's underperformance versus peers and the prospect that an Ashfield recovery and continued Sharp strength will drive a period of mid-teens earnings growth.

"The 20%-plus underperformance of UDG versus its peers, the prospect of two years of mid-teens earnings growth, and its strong balance sheet leads us to increase our price target," RBC said.

RBC noted that despite some early difficulties regarding staff absences and reworking of shift patterns, the Sharp division appears to have strong momentum. Operating profit in the first half, before the impact of the pandemic, was up 24% and the company reported "strong demand and improving mix" in its third-quarter statement, further helped by weak comps, RBC said.

It said that while the Ashfield division has lagged due to Covid, it remains positive about underlying demand for the services it provides but sees the structural issues around outsourced field sales forces being compounded by the pandemic in the near term.

At 1245 GMT, the shares were up 4.4% at 719.50p.