Deutsche Bank Optimistic On Fundamentals In Life Science Tools/Diagnostics Sector

Deutsche Bank initiated coverage of 16 companies in the Life Science Tools & Diagnostics sector, with a generally positive view on sector fundamentals, and the bank considers the end market environment more stable than stock volatility suggests.

Life Sciences Tools & Diagnostics Sector

Despite upcoming challenges in capital deployment, secular product cycles and long-term margin expansion, the brokerage is optimistic on the sector citing secular growth drivers, intellectual property, barriers to entry, high margins and recurring revenue.

Deutsche Bank noted that secular trends benefiting the sector include precision medicine, emerging market growth and enhanced regulatory scrutiny.

“The clinical diagnostics sector is a channel for many innovations borne of the research tools sector, such as testing which can improve the specificity of cancer prognosis and identify abnormalities in unborn babies,” analyst Dan Leonard wrote in a note.

Further, Leonard is optimistic on the tools sector fundamentals for the next couple of years, driven by growth in biopharma, China spending on scientific research, food and environmental testing, volume growth in diagnostics and continued consolidation opportunity.

On the lab industry front, the analyst believes short-term pricing pain could actually hasten a long-term volume gain opportunity for larger labs. The analyst also pointed out potential benefits from improvement in reimbursement coverage and potential rationalized pricing in areas of esoteric diagnostics.

Buy-Rated Stocks

Following are Leonard’s Buy-rated stocks with price targets:

• Agilent Technologies Inc A: $54.
• Quest Diagnostics Inc DGX: $108.
• Danaher Corporation DHR: $88.
• Hologic, Inc. HOLX: $48.
• Laboratory Corp. of America Holdings LH: $170.
• BIO-TECHNE Corp TECH: $115.
• Thermo Fisher Scientific Inc. TMO: $163.
• Waters Corporation WAT: $160.

Hold-Rated Stocks

Following is the list of Deutsche Bank’s Hold-rated stocks in the

And 2 Sell-Rated Stocks

• Bio-Rad Laboratories, Inc. BIO: $195.
• Bruker Corporation BRKR: $24.
• Genomic Health, Inc. GHDX: $31.
• Illumina, Inc. ILMN: $160.
• Mettler-Toledo International Inc. MTD: $420.
• PerkinElmer, Inc. PKI: $55.
• VWR Corp VWR: $26.

Meanwhile, Leonard is Sell-rated on Luminex Corporation LMNX and Myriad Genetics, Inc. MYGN, with price targets of $18 and $15, respectively.