The Ansell Limited (ASX: ANN) share price tumbled to an 18-month low today. But several leading brokers reckon this is the time to buy its shares.
Shares in the glove maker shed 2.6% to $30.51 when the S&P/ASX 200 Index (Index:^AXJO) closed 0.8% stronger on Friday.
The Ansell share price hasn't been this weak since May last year and investors are dumping it after yesterday's annual general meeting.
Ansell share price hit by uncertainty
Management stuck to its FY22 guidance and said that earnings per share (EPS) could drop 9% or increase by 2%.
That's an unusually wide range and doesn't do much for investor confidence. The upside to downside ratio doesn't look enticing either on first blush.
While investors didn't seem impressed by the commentary at the AGM, a number of brokers came out to reiterate their "buy" recommendations on the company.
Why the Ansell share price is still a buy
"Management flagged earnings will be 2H weighted, on near term COVID costs, inflationary pressures and price adjustments needing time to flow through," said Morgans.
"While the company is coming off COVID highs, those gains only relate to certain areas of its portfolio (i.e. exam/single use gloves) so are unlikely to be entirely reversed, with increased investments reflective of management's confidence in the long term potential of the business."
Morgans has an "add" recommendation on the Ansell share price with a 12-month price target of $41.87 a share.
Margin pressure no deterrent
Meanwhile, Morgan Stanley is another with a bullish rating on Ansell. This is despite management warning of price pressure and skinnier margins. The margin squeeze in the first half is attributed to manufacturing constraints, elevated freight, and price increases.
But the broker reckons there is too much bad news priced into the Ansell share price. It repeated its "overweight" rating on the shares with a 12-month price target of $51.35.
"Given a pronounced 2HFY22 skew, we believe the jury will remain out on ANN's FY22guidance until at least the 1HFY22results and associated early read on 2HFY22trends," said Morgan Stanley.
"At the current levels, ANN's share price implies no permanency to any benefit from the pandemic to market share or market size."
Bad news more than priced in
The analysts at Citigroup also believes the Ansell share price is oversold. This is despite the fact that the broker has cut its earnings forecast for the group.
"The issue for companies that have benefitted from the pandemic is that earnings will likely decline for the next few years," said Citi.
"It is not obvious that there will be a catalyst over the next six months for the stock to re-rate despite its valuation.
"However, we expect that once the market focuses on the industry fundamentals post pandemic, we should see a re-rating to more normal PE multiples."
Citi maintained its "buy" recommendation on Ansell but lowered its price target to $45.50 from $46.50.
