Despite Overly Negative Street Expectations, JPMorgan Stays Positive On Wright Medical

Over the last twelve months, Wright Medical Group Inc (NASDAQ: WMGI) has evolved into the only orthopedics company publicly traded on U.S. markets.

JPMorgan's Take

JPMorgan's Andrew Hanover upgraded Wright Medical from Neutral to Overweight, increasing the December 2017 price target from $21.00 to $26.00.

The analyst was impressed with Wright's "strong underlying fundamentals" displayed by the company's revenue beat for 1Q16 in May. Although Wright Medical reported Q1 EPS from continuing operations at $(0.38) vs. estimates of $(0.25), the company's revenues beat estimates, reporting $181 million vs. estimates of $171 million.

Overly Negative Street Expectations

The JPMorgan analyst believes Street expectations were "overly negative [...] for [the] metal-on-metal settlement." "With the CONSERVE metal-on-metal litigation being the primary hurdle weighing on shares, we see ~27 percent upside to current levels (3.3x 2017 EV/Sales)," stated Hanover.

'Recent Product Launches And Gaining Traction'

Hanover believes recent product innovations that have been gaining traction are also positive signs for the company. The analyst was most impressed by products such as "Augment," "Simplicity" and "Salvation."

Related Link: JPMorgan Sees Double-Digit Sales Ahead For NuVasive, Upgrades To Overweight

Tornier Merger

Finally, due to the Tornier merger, Hanover thinks Wright Medical has "leading franchises in both the upper and lower extremities markets, two of the fastest growing segments of the ortho industry, as well as a third leg of growth with Augment." The deal is expected to close by the end of the third quarter or beginning of Q4 according to the analyst.

At time of writing, Wright Medical Group was up 3.31 percent in Wednesday's pre-market session at $21.20.

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