Jefferies Says Wright Medical A Top Pick, Management Meetings 'Heartening'

Wright Medical Group Inc WMGI remains a Top Pick for Jefferies following a "heartening" meeting with management as the litigation concerns have overshadowed the company's strong underlying business.

"There are few if any other companies in medtech with revenues of $700mn that are consistently growing in the mid-teens. The outlook remains very encouraging," analyst Raj Denhoy wrote in a note.

Denhoy's Buy rating on Wright Medical is based on a view that revenue growth in 2016 would exceed initial forecasts as dis-synergies would be less than forecasted and contributions from products, like Augment, more than expected.

The company initially outlined $25-$30 million in expected dis-synergies though it appears these are tracking lower for the full-year 2016.

"Looking at our numbers for the back half of the year, we model 14% underlying growth (9% reported) suggesting about $21mn in total dis-synergies this year. Given lower than expected synergies thus far our numbers for the balance of the year are likely conservative and we continue to see bias to the upside in street numbers," Denhoy noted.

Meanwhile, the company raised its 2016 EBITDA guidance in conjunction with its second quarter results by $15 million to $40-$45 million. Given Wright's strong position in extremities and the growth in these markets, the analyst said the company will continue to spend in the Selling bucket.

"On balance, we continue to believe the company has given itself room to continue to exceed its profitability targets," Denhoy added.

At time of writing, shares of Wright Medical fell 1.12 percent to $23.87.