Berenberg 'encouraged' by Convatec's new strategy, shares rise

(Sharecast News) - Shares in Convatec surged on Friday, helped by positive broker commentary following the firm's investor event the previous day, with analysts at Bank of America, Berenberg, Jefferies and Deutsche Bank all reiterating their 'buy' recommendations on the stock. The initial market reaction to Convatec's capital markets day was subdued, with shares inching lower to 224p from 224.8p after the company outlined its new 'Accelerate' strategy and unveiled how it plans to achieve its recently increased organic growth guidance.

However, the stock was up 5.5% at 236.2p by 1556 BST on Friday, as investors dug through the details of the strategy and related research notes from brokers.

"As Convatec provided medium-term guidance at its FY 2025 results, there were not many new surprises from a financial perspective beyond the company outlining growth guidance at the segmental level," Berenberg said.

However, it added: "Overall, the event left us encouraged about Convatec's growth momentum and product pipeline."

Accelerate follows on from Convatec's previous FISBE strategy, which the company said turned it into a "chronic care leader" in each of its end markets of advanced would care, ostomy care, continence care and infusion care.

The firm's guidance for 6-8% organic growth across the company as a whole was upgraded from the 5-7% range at the time of its full-year results in February, and compares with the 4.8% growth registered across 2025. It also expects to deliver an adjusted operating margin of 24-26%, up from 22.3% last year, and double-digit growth in adjusted earnings per share per annum.

"At the event, management highlighted how it plans to operate at a mid-20% [adjusted operating margin] level (staying within the 24-26% range), with a preference for reinvestment to keep driving growth forward," Berenberg said.

It also highlighted management comments about capital allocation priorities, including the firm's focus on investing to deliver faster organic growth, as well as the potential for bolt-on M&A. The CFO also reportedly said the company does not want to dip below its leverage target multiple of 2x, "thus indicat[ing] that share buybacks are likely to be used".

The broker kept a 340p target price for the stock.