Shares of Smith & Nephew (NYSE:SNN) slipped initially but have regained some of their value since more talk of a possible buyout surfaced in the U.K. last week.
The British orthopedics giant is up 2.7 percent on The Street today to $43.94 after flirting with a 52-week low Friday, Nov. 25. The stock has fared even worse in its home country following an "uninspiring" meeting with analysts last week.
Credit Suisse analyst Christoph Gretler held to the bank’s "neutral" rating “having attended a rather uninspiring roundtable with chief executive Olivier Bohuon and chief financial officer Adrian Hennah in London,” according to The Guardian:
"Overall, we took away the following key messages: (1) management considers it a mistake to use its strong balance sheet for share buybacks or substantial dividend payout increases at this stage, as it sees important merger and acquisition opportunities (e.g. purchase of U.S. market share and biologics in wound care, emerging market infrastructure); Olivier stressed several times that he has an extensive deal-making history.
“(2) the initiated cost reduction program of more than $150m (details to be announced in February) is more about optimizing and redeploying resources and any underlying margin increase in 2012 will be slight (we assume 50 basis points on our estimates);
“(3) Smith and Nephew considers its orthopedic business as currently unstable, orthopaedics products generally as commoditized and poorly differentiated and as such exposed to continued price pressure (now seen even more in the 3%-4% range).”
“With such key messages, we see the Smith & Nephew investment case as difficult. In light of slow operating earnings growth, increased execution risks, low chances for substantial share buybacks and a reduced likelihood for industry consolidation, we stay on the sidelines.”
But an era of consolidation for the med-tech industry is on the horizon, according to Morgan Stanley analyst Michael Jungling, meaning SNN might be the hunted rather than the hunter, despite Bohuon’s rep as a deal-maker on the M&A trail.
The new paradigm means that “the greater importance of economies of scale … will either make S&N an acquisition target, or it will need to acquire," Jungling wrote, according to The Independent.
Buyout chatter has been a staple of discussion for Smith & Nephew all year, beginning with a rumored $11 billion takeover by Johnson & Johnson (NYSE:JNJ) in January &ndash the zombie deal that wouldn’t die.
Next came speculation in August that rivals Stryker or Biomet could be in the hunt, prompting a spokesman to tell MassDevice that such talk is "a perennial thing" the firm doesn’t stoop to address.
SN shares have lost 17.8 percent this year as of today’s £5.58 (≈$8.66) close in London. SNN shares have fared worse on Wall Street, losing 18.7 percent as of Friday’s close at $42.76.
LED Medical Diagnostics débuts on Toronto exchange
As we south-of-the-border denizens digested our Thanksgiving Day repasts, shares of LED Medical Diagnostics (TSX:LMD) began trading on the Toronto stock exchange’s Venture Exchange.
The Burnaby, British Columbia-based company, which makes a light-based oral cancer screening device, opened at 60 cents Canadian Nov. 25 and closed at 70 cents, a 52-week high and a 16.7 percent increase. Read more
GE Healthcare: We’ve dropped $800M on low-dose R&D
GE Healthcare (NYSE:GE) said it’s spent $800 million developing low-dose radiation-based imaging technologies over the past 15 years, including a just-announced $300 million.
The health care colossus made the announcement at the Radiological Society of North America’s annual meeting in Chicago, where it also announced a new MRI technique for creating images of soft tissue near metal. Read more
The Waltham, Mass.-based company filed a shelf registration for the sale of an unspecified number of shares and warrants with the federal watchdog agency, but didn’t set a date for the sale. Read more
Baxter’s new low was set at $47.69. The stock has since rebounded and was trading at $49.02 as of about 11:40 this morning. Haemonetics set its low at $54.99, but also clawed its way back, trading at $56.64 in mid-day activity today. NuVasive’s nadir was $12.27, but NUVA shares were up to $13.08 today.
Analysts’ ups and downs
- Amgen (NSDQ:AMGN): Downgraded to "hold" by TheStreet Ratings.
- Baxter (NYSE:BAX): Citigroup lowers price target to $50; Morgan Keegan reiterates "outperform" rating, sets $67 target; Morgan Stanley reiterates "overweight" rating, sets $63 target.
- Cooper Cos. (NYSE:COO): JP Morgan lowers estimates through 2013 on lower margins, sets "neutral" rating and $72 price target.
- DexCom (NSDQ:DXCM): Capstone upgrades from a "hold" to "buy."
- Masimo (NSDQ:MASI): Bank of America initiates coverage at "underperform" and $19 per share target.
- Medtronic (NYSE:MDT): Bank of America upgrades to "buy," sets $42 price target; Jefferies lowers estimates through 2012, sets "hold" rating; Brean Murray lowers target to $42; TheStreet Ratings upgrades from "hold" to "buy."
- NxStage Medical (NSDQ:NXTM): Piper Jaffray initiates coverage at "overweight," $24 per share target.
- Smith & Nephew (NYSE:SNN) : Société Générale initiates at "buy" rating; Exane BNP Paribas upgrades to "outperform" from "neutral;" Morgan Stanley retains "equal-weight" rating; Panmure cuts SN target price to £6.40 (≈$9.93) from £7.50 (≈$11.64).