KeyBanc: 3 Reasons Why Invacare Is No Longer A Buy

Invacare Corporation IVC, a manufacturer and distributor of medical equipment used in non-acute care settings, signaled in its second-quarter earnings report a turnaround is not progressing as rapidly as expected, according to KeyBanc Capital Markets. 

The Analyst

KeyBanc Capital Markets' Matthew Mishan downgraded Invacare from Overweight to Sector Weight.

The Thesis

Invacare's earnings report does show some signs of improvement in the business, but it is not enough to support a bullish stance, Mishan said in the downgrade note. (See the analyst's track record here.) 

For example, the portable oxygen concentrator strategy hasn't gained sufficient traction to offset declines in the company's legacy products, the analyst said. The home medical equipment segment is "stable" for now, and any woes in Europe can no longer be offset by favorable foreign exchange rates, he said. 

Invacare decided in 2016 and 2017 to deprioritize low-margin products and focus on a more clinical complex portfolio, Mishan said. At the same time, the company also guided toward $28 million in annualized savings from various initiatives, and any benefits are now reflected in the company's results, he said. 

Invacare needs to show better sales acceleration moving forward for the company to hit its $100-million EBITDA target by late 2020, Mishan said. The company has shown it is making some progress, but there are simply too many "moving pieces," he said. 

Price Action

Invacare shares were trading down more than 3 percent to $16.05 at the time of publication Thursday. 

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