Updated Aug 18 at 11:31am ET.
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Wolfe Research downgraded the medical technology company to Peer Perform, which is their way of saying they expect the stock to perform in line with its rivals rather than beating them. This change comes as the stock sits at about $335, well below the average analyst target of $383.
While the company remains a leader in robotic-assisted surgery, a downgrade like this often suggests analysts see fewer reasons for the stock to rise in the near term. For long-term owners, the core of the business still relies on hospitals continuing to buy its surgical robots and the specific implants that go with them.
The company will pay a quarterly dividend of $0.88 per share, which is about 5 percent higher than what it paid a year ago. This payment is the same as the previous quarter. Consistent dividend growth is a sign of a healthy business that generates more cash than it needs to run its daily operations. For long-term owners, these steady increases help build the total return on the stock over time.
Source: GlobeNewsWire
The company earned $3.69 per share this quarter, which was about 6 percent higher than analysts expected. Total sales reached $6.6 billion, a 9 percent increase over last year. This growth was led by the MedSurg and Neurotechnology arm, which provides tools for brain and spine surgeries.
Management noted they are recovering well from a cyberattack that happened in March. More importantly for the long term, profit margins improved by 1.7 percentage points. This shows the company is getting more efficient as it sells more joint implants and surgical robots, which is a key part of our view that this business can grow more profitable as it gets larger.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
The company launched the Mako RPS, a handheld robotic system for knee replacements. This expands their robotic lineup beyond the large robotic arms they are known for, allowing them to reach more surgeons and hospitals that might prefer a smaller tool.
This matters because the company's strategy relies on getting its technology into operating rooms to lock in future sales. Once a hospital uses a Mako system, they typically must buy the company's specific implants to use with it. Expanding the types of robots available helps protect and grow their share of the joint replacement market.
Source: PRNewsWire
Analysts lowered several price targets following the company's recent earnings report. Most experts remain positive, with 38 of 52 rating the stock a buy and an average target price that suggests 14% upside from current levels.
Management has a very consistent habit of setting a bar they can clear, beating analyst profit targets in seven of the last eight quarters.
| Expectation | |
|---|---|
| EPS | $3.59 |
| Revenue | $6.69B |
