Bruker Corp Has 'Great Story,' But It's Not Time To Jump In Yet

• Shares of Bruker Corporation BRKR have declined by 9.64 percent year-to-date.
• Morgan Stanley’s Steve Beuchaw has initiated coverage of Bruker with an Equal-weight rating and price target of $21.
• Although benchmarking suggests margin expansion potential of 100 bps per year, Beuchaw recommends waiting for a more attractive entry point to the stock.

According to the Morgan Stanley report, the company is expected to grow at 2-5 percent within a normalized environment and that there could be upside due to execution, with 3 percent growth expected for 2016 and 3.9 percent for 2017.

“Research end markets are accelerating, according to our proprietary index, while trends in Europe have recently begun to improve,” the report stated, while adding that the decelerating on the semiconductor markets, as well as the soft, albeit stabilizing, industrial markets, are expected to pressure the growth rate.

In addition, Bruker's end market appear “modestly slower,” in the absence of major funding cycles. On the other hand, however, the company appears to have a “distinct” opportunity in the NMR market, with Agilent Technologies, Inc. A exiting the market in 2014.

“Share gains in NMR could drive our organic growth estimate 400bps higher in 2016 in a bull scenario, while better pricing on the instrument is worth up to 100bps for margin expansion,” Beuchaw mentioned, while expecting EBITDA margin upside of 500 bps for Bruker over the next five years.