United Therapeutics stock target cut by BofA, still Underperform By Investing.com

On Thursday, BofA Securities revised its price target for United Therapeutics Corp . (NASDAQ:), a biotechnology company, changing it to $262 from the previous $270. The firm has maintained an Underperform rating on the stock.

This adjustment was made following a physician survey on Pulmonary Arterial Hypertension (PAH) and Interstitial Lung Disease (ILD), leading to a change in valuation methodology from net present value analysis to a price-to-earnings (P/E) multiple approach.

The survey conducted by BofA Securities revealed several key findings. It confirmed that the launch of Merck’s Winrevair is unlikely to affect the market for inhaled prostacyclins, which bodes well for United Therapeutics’ Tyvaso DPI in the near to medium term. However, the survey also indicated that a significant percentage of physicians expect Winrevair to considerably reduce the use of infused and oral prostacyclins. This could present a challenge for United Therapeutics’ products Remodulin and Orenitram, which are part of the company’s portfolio for treating PAH.

The updated valuation assumes a 9.75 times multiple on the estimated earnings per share (EPS) for the year 2025. This multiple is consistent with companies that exhibit flat growth, which BofA Securities believes matches United Therapeutics’ current growth trajectory. The new price target reflects the potential challenges and uncertainties in the company’s product portfolio over the longer term.

In other recent news, United Therapeutics Corp. has reported a significant 34% year-over-year revenue growth in the first quarter of 2024, exceeding expectations. This growth was primarily driven by the performance of its drug Tyvaso and the impact of the Inflation Reduction Act’s Medicare Part D redesign, leading to increased commercial drug utilization. The company’s strong first-quarter performance prompted Oppenheimer to maintain its Outperform rating on United Therapeutics shares and raise the target price from $375 to $400.

These recent developments also include a robust start to 2024 with record first-quarter revenues of $678 million. The company’s key product, Tyvaso, led this growth with $373 million in revenue, marking a 56% surge compared to the previous year. Additionally, United Therapeutics is advancing in clinical trials and organ manufacturing initiatives, notably in xenotransplantation, and has announced a $1 billion accelerated share repurchase program, expected to conclude by the end of Q3 2024.

The absence of typical seasonal patterns in the company’s first-quarter performance, along with these factors, is expected to provide a tailwind for the company’s performance in the coming quarters. As a result of the strong first-quarter results and the positive outlook, Oppenheimer has revised upward its revenue and earnings per share estimates for United Therapeutics.

InvestingPro Insights

In light of BofA Securities’ revised price target and underperform rating for United Therapeutics Corp., it is worth considering some additional metrics and insights from InvestingPro. The company’s aggressive share buyback strategy and its strong cash position, with more cash than debt on its balance sheet, are positive indicators of financial health. Furthermore, United Therapeutics has been recognized for its high shareholder yield and impressive gross profit margins, with the last twelve months as of Q1 2024 showing a gross profit margin of 88.87%.

United Therapeutics is also trading at a low P/E ratio relative to near-term earnings growth, with a P/E ratio (adjusted) of 13.73, suggesting that the stock may be undervalued based on its earnings potential. Additionally, the company’s liquid assets exceed its short-term obligations, which is a sign of good liquidity management. For investors looking for stability, the stock generally trades with low price volatility, and the company’s cash flows can sufficiently cover interest payments, which adds to the company’s financial robustness.

To gain further insights and additional InvestingPro Tips, including analysis on the company’s earnings revisions and its performance relative to market highs, visit InvestingPro. There are 19 additional InvestingPro Tips available for United Therapeutics, which can be accessed with an additional 10% off a yearly or biyearly Pro and Pro+ subscription using coupon code PRONEWS24.

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