While investor uncertainty from President Donald Trump’s tariffs looms over the market, Sotera Health may not feel the pain, according to Goldman Sachs. The bank upgraded shares of the testing lab company to buy from neutral and raised its price target to $17 from $14. That implies 37.3% upside from Friday’s close. “While SHC has always maintained a durable business model with exposure to commercial pharmaceutical and medical devices, which are less volatile in an economic downturn due to the necessary nature of the products, we believe this exposure has become much more attractive to investors in the current environment given increased macro-related uncertainty,” analyst Matthew Sykes wrote to clients Monday. The stock is coming off a more than 1% slide for April after Trump announced his steep “reciprocal” tariffs on goods from other countries, though he later paused many of those levies for 90 days. The market spiraled in the aftermath of that initial announcement, with the S & P 500 once nearing a 20% drop from its recent February high during the month. Sotera Health shares are down around 5% year to date and more than 15% over the past six months. SHC 6M mountain SHC, 6-month But Sykes thinks the sell-off for the stock was “unwarranted” because Sotera Health is “uniquely insulated” from Trump’s tariffs as a result of its primarily service-based model and Cobalt-60 supply business exemptions under the U.S.-Mexico-Canada Agreement. Moreover, the analyst found that the company has meaningful exposure to end markets that will prove to be more durable in the event of a recession, such as medical devices and pharmaceuticals. He noted that the commercial products involved in Sotera Health’s Sterigenics business has about 68% revenue exposure to the medical device end market and about 15% revenue exposure to pharmaceuticals. “While we remain more cautious on names in our coverage universe that have exposure to Pharma R & D spend and the US Academic research market given capital conservation efforts and funding concerns could lead to lower volumes in those areas, we believe commercial products in Pharma and Med device are much less likely to see negative impacts from broader economic uncertainty,” Sykes also wrote. Wall Street is split on Sotera Health. Among the eight analysts covering it, four have a strong buy or buy rating, while the other four have a neutral view with a hold rating, per LSEG. The stock was nearly 4% higher in morning trading on Monday, bringing its gains over the past week to 14%.
Source: cnbc.com
