Wells Fargo Downgrades Medtronic, Inc. (MDT) to Market Perform; Spine Journal Represents Tip Of Iceberg

Wells Fargo downgraded Medtronic, Inc. (NYSE: MDT) from Outperform to Market Perform.

Wells analyst says, "We believe the InFuse papers published in The Spine Journal on June 28 will have broader implications for MDT and its spine business than the Street currently expects. We think The Spine Journal papers could lead to the following outcomes: (1) a significant reduction in the sales of MDT’s spine biologics franchise; (2) a reduction in the sales of MDT’s spinal instrumentation business; (3) a potential FDA review of InFuse, including an Advisory Committee meeting, which could lead to more limited use of InFuse; (4) potentially larger criminal penalties in the Department of Justice (DOJ) investigation of the off-label promotion of InFuse; (5) the potential emergence of class action lawsuits; and (6) the potential sale of the entire spine business."

"...we are reducing our FY2012E-13E sales by $209MM and $322MM, respectively, to $16.491B and $17.045B. In addition, we are lowering our FY2012E-13E EPS by $0.04 and $0.01, respectively, to $3.43 and $3.74. Our new FY2012E EPS is at the low end of MDT’s FY2012 guidance range. We are lowering our valuation range to $36-37 from $46-47 which assumes 10x our new CY2012 EPS estimate."

For more ratings news on Medtronic, Inc. click here and for the rating history of Medtronic, Inc. click here.

Shares of Medtronic, Inc. closed at $38.53 yesterday.

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