Coloplast Advances as Citi Sees U.S. Growth: Copenhagen Mover

Coloplast A/S jumped the most in four months in Copenhagen after Citigroup Inc. told clients to buy the stock as the world’s largest maker of ostomy products benefits from cost reductions and a growing U.S. market.

Coloplast rose as much as 4.7 percent, the largest increase since April 30 and today’s biggest gain in the Nasdaq OMX Copenhagen 20 index. The shares added 3.7 percent to 314.90 kroner at 10:45 a.m. in the Danish capital, with trading volume at 78 percent of the three-month daily average.

Coloplast, which last month reported third-quarter earnings before interest and tax that missed analyst estimates, had lost 11 percent of its stock market value in the two months through yesterday. Citigroup today said the recent decline offers “an attractive entry point” and started coverage of the share with a buy recommendation.

“Coloplast is a market leader benefiting from an excellent management team with a proven strategy,” Jonathan Beake, a London-based analyst at Citigroup, said in a note. “With further gross margin expansion and improved U.S. performance we expect the company to continue to deliver double-digit earnings growth and attractive returns on invested capital. We don’t feel this is fully reflected in the current valuation.”

Citigroup set a price estimate of 370 kroner on the Coloplast share, which compares with an average target of 314 kroner among 18 analysts covering the stock, according to data compiled by Bloomberg.

Coloplast on Aug. 13 reported Ebit of 943 million kroner ($168 million) for the three months ending June 30, missing the average estimate of 950 million kroner in a Bloomberg survey of analysts. The Humlebaek, Denmark-based company repeated a full-year forecast of revenue growth of as much as 6 percent and an Ebit margin as high as 32 percent.

“Our in-depth analysis of the cost base leads us to believe that the company will easily meet the guided gross margin expansion for the next two years,” Beake said. “Furthermore, we see continued operational improvements beyond this, despite an already best-in-sector Ebit margin.”

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