Convatec Earnings: Solid Growth Across Segments, Shares Undervalued

Key Morningstar Metrics for Convatec Group

• Fair Value Estimate
  : £2.70
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Convatec Group’s Earnings

Convatec reported first-quarter trading results in line with our expectations. Growth came from all segments, with group organic growth excluding InnovaMatrix at 4.8%. Management reiterated its 2026 guidance and medium-term financial targets.

Why it matters: All segments grew midsingle digits, with Infusion Care the standout at mid- to high single digits, all in line with our forecast. Management expects second-half acceleration, and we view the company as well on track for its full-year guidance of 5–7% organic growth excluding InnovaMatrix.

• Management reiterated its full-year adjusted EBIT margin guidance of above 23%, with tariff and currency headwinds seen as limited and raw materials well-hedged for 2026, while operating efficiency drives gains. If high spot rates persist into 2027, more significant headwinds could follow.
• Infusion Care announced its first patch pump supply agreement, expanding its addressable customer base. This is an encouraging first step toward broadening its presence in the Diabetes market and an important pillar that raises our confidence in its double-digit medium-term growth target.

The bottom line: We maintain our £2.70 fair value for narrow-moat Convatec. Shares are undervalued, offering 30% upside.

• We raised our 2026 adjusted operating margin estimate to 22.8% from 21.7%, as management reiterated its 23% guidance and confirmed limited tariff and inflation impact. With all margin gains back-half-loaded, we remain cautious on full delivery given macro uncertainty. Our medium-term 24.6% target is unchanged.
• Shares remain undervalued. The market appears to be discounting execution risk around operating efficiencies and reimbursement pressures. We expect new launch momentum and operating improvements to narrow the margin gap to peer Coloplast, with recent launch successes reinforcing our confidence in management’s execution.