DA Davidson Out Bullish On Landec: 'We Can Justify A Constructive Stance'

While margin initiatives are underway in Landec Corporation LNDC's Curation Foods segment, the Lifecore Biomedical segment is poised to form secular tailwinds in the pharmaceutical industry, according to D.A. Davidson.

The Analyst

Brian Holland initiated coverage of Landec with a Buy rating and $14 price target.

The Thesis

The initiatives undertaken by Landec’s recently appointed CEO Dr. Albert Bolles to improve profitability in the Curation Foods segment appear achievable, Holland said in a Friday initiation note. 

The initiatives are aimed at simplifying Curation Foods’ business, within which the company enacted an enterprise-wide operation management system to improve efficiencies, as well as a cost-out program to mitigate labor, freight and raw material cost pressures, the analyst said. 

Regardless of the actual margin expansion, “we can justify a constructive stance on relatively conservative assumptions,” he said. 

The pharmaceutical industry has been increasingly outsourcing new product development and manufacturing to capable contract development and manufacturing organizations, and the Lifecore Biomedical segment is poised to benefit from this trend, Holland said. 

While this segment’s hyaluron and private label products were already performing well among ophthalmic surgical companies, they could also be employed by oncology, ENT, pulmonary, neurology and general surgery clients, according to D.A. Davidson. 

Price Action

Landec shares were down 0.55% at $10.91 at the time of publication Friday. 

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