Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM) both reiterated their "Neutral" rating on Medtronic (NYSE:MDT), citing little in the way of catalysts to drive the company forward, even though they may have a decent second quarter.
Goldman said, "We maintain our Neutral rating despite expected upside in F2Q, as we do not see the drivers of strength (fluctuations in inventory levels) as an indication of an improved fundamental outlook. The variable would be spine (21% of sales), where the US market looks to be stabilizing in core fusion, but this could be offset by sharp declines in the Kyphon business."
JPMorgan added, "What’s really hurt Medtronic is the erosion of Spine market fundamentals and within that its 2007 acquisition of Kyphon. Spine market growth, as everyone knows, slowed fairly dramatically starting in 4Q09 from a combination of (1) increased payer pushback in the US on the overutilization of spinal fusion
surgery; (2) the category’s economic sensitivity; and (3) a swing in pricing power away from the suppliers. Through the first three quarters of 2010, spine market growth slowed to 1-2%."
Medtronic Inc. closed Monday at $34.70. Goldman has a price target of $36 a share on them, and JPMorgan has a price target of $38 on the company.
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