JP Morgan has reiterated its 'overweight' rating on ConvaTec, the medical devices group, arguing that concerns about a second-half growth step-up are overblown and that the company's 2027 earnings guidance is largely de-risked.
The broker issued the note ahead of ConvaTec's 10-month trading update, due on 18 November, saying the company had reiterated confidence in its ability to hit full-year 2026 targets during a recent meeting with its investor relations team.
ConvaTec delivered organic revenue growth of 21.2% in the first half but needs to deliver around 25% in the second half to meet its full-year guidance, a step-up that has weighed on the stock.
JP Morgan said the components driving that acceleration, including a more favourable product mix, timing of orders within the intermittent catheter division and cost efficiencies, are all within management's control.
The broker made adjustments to its divisional growth mix for the second half without changing group-level forecasts, while housekeeping updates to below-the-line items lifted its earnings per share estimate by 7.9%, placing it around 2% and 1% ahead of consensus for 2026 and 2027 respectively.
JP Morgan flagged the long ConvaTec, short Coloplast pair trade as compelling on valuation grounds, with ConvaTec trading on 13.8 times 2027 earnings and 12.1 times 2028 earnings for double-digit EPS growth, against Coloplast's 18.3 times and 16.7 times, respectively.
In afternoon trading, the shares were up 1.7% at 239.4p.
