Consolidation Squeezing HDIX

A Hold recommendation has recently been issued to medical products company Home Diagnostics, Inc. (HDIX - Snapshot Report) by Zacks senior healthcare industry analyst Gregory Aurand, CFA.  Here's what his latest update stated:

"Home Diagnostics, Inc. is a developer, manufacturer and marketer of blood glucose monitoring systems and disposable supplies. The company has two large concentrated customers, and we believe the company's strategy of providing low-cost blood glucose systems under its co-branding plan could affect its future pricing capabilities.

"Customer consolidation could also reduce the growth outlook. As well, we expect increased competition from Johnson & Johnson (JNJ - Analyst Report) and Medtronic (MDT - Analyst Report), and the MMA competitive bidding program will also likely pressure the top- and bottom-line in 2008. Our target is $9.00 and our rating is Hold. Although the company reported third quarter EPS that exceeded expectations, higher gross margin offset weaker revenues.

"Management also reduced forward guidance for the remainder of 2007, partly due to channel consolidation and distributor changes. Given the risk factors, and low growth outlook, we believe the company should trade at a discount to comparables. At a 20% discount to the group average 1.4x 2008 P/E/G, we believe HDIX is fairly valued at $9.00. Our rating on the stock is Hold."

Read the full analyst report on HDIX

Read the full analyst report on JNJ

Read the full analyst report on MDT