We are reverting to a Neutral recommendation on
) from Outperform as we believe that the stock is fairly valued
at current levels. Our target price is $19.00. The stock carries
a Zacks #3 Rank (Hold rating) in the short run.
JOHNSON & JOHNS (JNJ): Free Stock Analysis
3M CO (MMM): Free Stock Analysis Report
SURMODICS (SRDX): Free Stock Analysis Report
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In November 2012, SurModics came out with decent numbers for the
fourth quarter of fiscal 2012 (ended September 30, 2012). The
company's fourth quarter fiscal 2012 adjusted earnings of 19
cents per share beat the Zacks Consensus Estimate by 2 cents.
Adjusted revenues climbed 12.3% to $13.8 million in the final
quarter of fiscal 2012. Strong sales of vitro diagnostics
offerings and hydrophilic coatings boosted revenues.
We note that SurModics has taken a number of steps to improve
efficiency following its disappointing performance in fiscal
2010. The company trimmed its work-force and made certain changes
to its organizational structure to improve efficiencies.
Moreover, following the disappointing performance in fiscal 2010,
SurModics revamped its board of directors and also brought about
a change at its helm, with the appointment of a new CEO, Gary R.
Maharaj. We note that Maharaj is the former President and CEO of
Arizant Inc., which was sold to
) in October 2010. We are positive on the sale of SurModics'
Pharmaceuticals unit in 2011 as this has allowed the company to
focus on its core businesses.
However, since royalties are a major source of revenues at
SurModics, any royalty related setback will affect the top line.
Johnson & Johnson
) decision to stop manufacturing Cypher and Cypher Select Plus
sirolimus-eluting coronary stents, from which SurModics earned
royalties, affected SurModics' top line. Setbacks of a similar
nature will negatively impact SurModics' stock price.
While encouraged by the steps taken by the company to revive
itself, we see limited upside potential for the stock from