Shares of Smith & Nephew (NYSE:SNN) were on the rebound today after a downgrade by analysts at Citi sent them spinning down nearly 4 percent yesterday.
SNN shares closed Sept. 21 at $45.39, but opened at $43.88 the next morning, down 3.3 percent on news of the downgrade. The stock closed yesterday at $43.68, down 3.8 percent. Smith & Nephew closed out today at $44.57, up 3.0 percent from yesterday’s low-water mark of $43.28 but still 1.8 percent shy of Thursday’s close.
The Citi analysts cut their estimate of the stock by two notches, spurred by the slim chances of a buyout and declines in the markets for hip and knee implants. The bank shifted its rating on SNN shares from "Sell" to "Buy," according to StreetInsider.com.
Another potential acquirer, Johnson and Johnson (NYSE:JNJ), has its hands full with a $21.3 billion acquisition of Synthes Inc., the Citi analysts noted. But even the size of that bite isn’t enough to rule out others, at least according to J&J’s CFO.
The bank cut its 2012 and 2013 sales estimates for Smith & Nephew’s orthopedic business by 4 percent and 8 percent, respectively. Citi also said the hip and knee markets won’t turn around in the near term and cast a dim view on the prospects for growth in emerging markets until at least 2014, the website reported.
NuVasive, BD rebound from 52-week lows
BD’s stock has been volatile all year, hitting a high of $89.75 before plunging to yesterday’s low of $71.71 – a 25.2 percent spread. The stock closed today at $73.74, up half a percent on the day but still 2.3 percent off its Sept. 20 closing mark of $75.44.
As for NuVasive, a legal judgment that could wind up costing it more than $100 million in a patent infringement dispute with Medtronic Inc. (NYSE:MDT) sent its shares down the slide. NUVA shares plunged 12.1 percent, to $18.65 per share, after news of the adverse judgment broke late Sept. 20. Shares closed up a tad yesterday at $18.69 (after posting the 52-week low of $17.87) and regained 1.9 percent today, closing at $19.04.
A federal jury in San Diego awarded $101.2 million to Medtronic and $660,000 to its smaller rival Tuesday in a patent infringement lawsuit over spinal implant technology. The news prompted at least one analyst on The Street to lower his earnings estimate for NuVasive’s 2011 and 2012 fiscal years "to account for ongoing MDT royalty accruals."
"In the near-term, uncertainty around the exact amount of royalties and/or the possibility that MDT will seek an injunction may keep NUVA shares under pressure – at least until a final judgment is issued," Leerink Swann analyst Rick Wise wrote, noting that it’s only the first phase of a three-stage trial. "However, now that the financial impact of this first, and in our view more significant, phase of the trial has – at least partially – been framed, we think the stock is poised to move higher from currently depressed levels as: (1) we get increased clarity that royalties are not likely to be materially worse than the company’s initial estimates, and (2) investors begin to re-focus on the company’s above-average sales growth potential."
Wise maintained the investment bank’s "Outperform" rating on the stock, but cut earnings-per-share estimates for 2011 to $1.06, from $1.11, and lowered the 2012 EPS forecast from $1.27 to $1.15.