Piper Jaffray Assumes Smith & Nephew (SNN) and Upgades to Buy

July 23, 2008 8:14 AM EDT

Piper Jaffray assumes coverage of Smith & Nephew (NYSE: SNN) and upgardes to Buy rating with a $69 price target. Previously, the company was rated a Neutral with a $61 price target.

The firm said, "SNN's robust product cycles and margin improvement program position the stock to outperform its peers, driven by revenue growth and improving operating leverage. The stock is attractively valued, trading at the low end of its historical valuation range relative to the S&P, and we are buyers ahead of the company's 2Q08 results."

Piper Jaffray conducted a survey of 50 orthopaedic surgeons and conducted anecdotal checks with surgeons and industry contacts. The results show that "SNN will likely be one of the beneficiaries in the post-DOJ world of orthopaedics." The respondents showed significant interest in working with smaller to mid-sized manufacturers, which includes SNN. The firm’s checks show that the company is gaining traction at select high-profile surgery centers and has been successful in gaining interest among high-volume surgeons affiliated with other manufacturers. Therefore, Piper Jaffray believes "these gains, together with the company's strong product cycles and improving underlying operating margins should help drive upside and outperformance over the next several quarters."

Smith & Nephew plc, together with its subsidiaries, engages in the development, manufacture, and marketing of medical devices to medical and surgical service providers worldwide.

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