Biggest IPO In Years Is A Winner So Far, But This Key Test Looms

Medline (MDLN), the biggest IPO in years, has gone up more than 60% since it went public two months ago, and investors will get its first earnings announcement as a public company next week.

The nation’s largest provider of medical supplies will release fourth-quarter results on Feb. 25 before the market opens. Analysts expect earnings of 24 cents a share, a 41% year-over-year decline, on sales of $7.115 billion, vs. $6.784 billion a year ago, according to IBD MarketSurge.

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Northfield, Ill.-based Medline is a distributor of medical supplies across the health care system. Its warehouses stock more than 300,000 products, ranging from exam gloves to lab equipment to angiography needles. About 145,000 are third-party products. The company has made multiple acquisitions to grow its catalog, and today operates in more than 100 countries.

In an investor presentation, Medline cited long-term trends, such as an aging population needing more care, and growing numbers of patients with chronic illnesses.

Medline’s Dec. 17 IPO didn’t get as much attention as last year’s unicorns such as Figma (FIG), CoreWeave (CRWV) or Circle (CRCL). Yet Medline topped them all with a $7.2 billion IPO that was the largest by a U.S. issuer since Rivian Automotive (RIVN) in 2021. Shares went public at 29 and have never traded below 34.

The stock formed an IPO base and broke out Jan. 22 at a 45.50 buy point. Shares remain in a buy zone that extends to 47.77. In afternoon trading Thursday, Medline stock was just below 47. Its relative strength line is making new highs, a positive sign.

Generally, it’s risky to buy a stock right before an earnings announcement in case of disappointing results. Investors could choose to buy call options as an alternative with limited risk.

The company has a heavy following on Wall Street, with 28 analysts covering the IPO stock. Of those, 22 have buy or outperform ratings and the rest have hold recommendations, according to FactSet. Most initiated coverage on Jan. 12. The average price target is 47.77.

UBS analyst Kevin Caliendo gave a buy rating and 48 price target, calling Medline a core health care holding.

“Our base case conservatively assumes a normal pace of annual new business wins ($1 billion), though (Medline) has exceeded these targets in 2024 and 2025 on a winning formula of low-cost manufacturing, contractual flexibility, expansive private label portfolio offerings and aggressive expansion into new verticals and geographies,” he said.

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