Leerink Partners Cuts Price Target on Medtronic (MDT) as Shares Trade Down
Leerink Partners miantained a Market Perform rating on Medtronic, Inc. (NYSE: MDT), and cut the price target to $76.00 (from $85.00), after shares traded down. Shares traded lower yesterday despite reporting another mid-to-high single digit sales growth quarter.
Analyst Danielle Antalffy commented, "MDT shares traded lower yesterday despite reporting yet another -- its 3rd consecutive -- mid-to-high single digit sales growth quarter, as investors were clearly disappointed in the company's lack of more meaningful positive operating leverage. Currency was a 110 point drag, but operating margins still only increased less than 100 bps y/y despite the positive impact of an extra selling week in the quarter. Management expects to generate significantly more positive operating leverage in the back half of FY2016 as MDT generates ~$300M-$350M in COV-related cost synergies, which is expected to ultimately ramp to $850M by FY2018. And MDT is clearly successfully executing on new product launches -- which added over 1,000 bps to growth in the quarter -- and building a sustainable foundation for more consistent mid-singledigit sales growth ahead, with potential for further outperformance vs. the company's reiterated 4%-6% FY2016 organic sales growth guidance ex. the 1.0%-1.5% estimated impact from an extra selling week. But without tangible signs of the positive operating leverage investors are looking for from here, we're inclined to remain on the sidelines for now as we see further multiple expansion unlikely."
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Shares of Medtronic, Inc. closed at $69.98 yesterday.