Stryker (SYK) PT Lifted at BofA/Merrill Lynch; Comments on Possible Smith & Nephew (SNN) Deal

BofA/Merrill Lynch analyst Bob Hopkins reiterated a Buy rating and boosted his price target on Stryker (NYSE: SYK) price target of $94.00 (from $87.00) as they now see a roughly 50% probability that SYK's out year earnings power will be roughly 20% higher than current consensus estimate.

Commenting on Stryker's potential acquisition of Smith & Nephew (NYSE: SNN), the firm said a lower tax rate will be one of the biggest determinants.

Hopkins commented, "In our view, one of the biggest determinants of whether or not SYK ends up acquiring SNN will be SYK's assessment of their ability to lower the combined companies' tax rate. Currently, SNN's tax rate is higher than SYK's, but in our view, a combination and inversion could over time lead to a materially lower tax rate. Indeed, our view that SYK's 2016 pro-forma earnings power could be in the $6.85-$6.95 range assumes a combined company tax rate of 21%. In our view, SYK would prefer more growth-oriented acquisitions, but this is a unique time in healthcare and the rationale behind consolidation – especially in orthopedics – could not be stronger, in our view."

For an analyst ratings summary and ratings history on Stryker click here. For more ratings news on Stryker click here.

Shares of Stryker closed at $84.49 yesterday.

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