What happened
For the second straight day, beleaguered Sotera Health (SHC 0.44%) took a wallop on the stock exchange Tuesday. The company's shares were hammered by over 16%, on the back of a recommendation downgrade from a prominent investment bank.
So what
Tuesday morning, Goldman Sachs analyst Amit Hazan lowered his Sotera recommendation to neutral from the previous buy. He also took a broadsword to his price target, slicing it down to $9 per share from the preceding $23.
While drastic, Hazan's adjustments were hardly shocking. They follow Monday's news that a jury in an Illinois county court awarded a plaintiff $363 million from the healthcare company and two related businesses. That plaintiff, Susan Kamuda, sued the three entities for being responsible for her breast cancer and her son's non-Hodgkin's lymphoma.
A clutch of plaintiffs have filed similar lawsuits against Sotera and its peers, alleging that one of those companies -- Sotera subsidiary Sterigenics -- produced highly carcinogenic emissions from its factory near Chicago. Kamuda's case is the first in which a verdict was rendered and a payout awarded, so it's strongly possible that many of the other cases will conclude similarly.
Now what
In Hazan's view, the potential legal outcomes are "so open ended that it creates a material overhang on the stock for the foreseeable future." At this point, that feels like an understatement. Minimally, Sotera will have to spend significant amounts of money defending itself, and given the outcome of the first trial it'll be on the hook for many millions of dollars more in payouts.
