Jefferies Upgrades Wright Medical To Buy: Next Year's Forecast Could Be Conservative

• Shares of Wright Medical Group Inc WMGI have declined 21.5 percent over the past six months, from $27.40 on May 29.
• Jefferies’ Raj Denhoy has upgraded the rating on the company from Hold to Buy, while raising the price target from $23 to $29.
• Denhoy believes that there could be upside to the 2016 sales forecast for Wright Medical plus Tornier, while the stock valuation is expected to improve as management executes against conservative targets.

Analyst Raj Denhoy explained that the outlook for the combined entity was kept grounded throughout the merger with Tornier. However, with various factors at play, “including growth in the underlying businesses, the timing and contribution from Augment, and sales dis-synergies and revenue forecasts have come down significantly since the deal was announced.”

However, Denhoy now believes that the current forecasts for 2016 and 2017 appear increasingly achievable, and could even prove conservative. In fact, the Augment business and sales dis-synergies are now expected to be areas of upside.

“Recent commentary suggests the early adoption of Augment is going well and the $18mn we model based on our recent survey is looking like it could prove conservative,” according to the Jefferies report.

Denhoy believes that the potential for upside to drive revenues of $710 to $715 million in 2016.