NEW YORK (AP) -- Shares of orthopedic device makers NuVasive and Wright Medical Group rose Friday after an analyst started coverage of the companies and the sector with a positive opinion.
Analyst Jason Wittes of Brean Murray Carret & Co. said orthopedic device companies are spending more money on research and are coming up with new, more advanced products that represent bigger improvements on older devices. He said the companies will also benefit from expanded health insurance coverage, while sales volumes have stabilized and their share prices now reflect lower prices for some products, like hip and knee implants.
Wittes said Zimmer Holdings Inc. is his top pick in the sector because it is cutting expenses and buying back stock, which will boost its net income, and it is launching "its most impressive lineup (of products) in years". He began covering the stock, as well as shares of NuVasive Inc. and Wright Medical Group Inc., with "Buy" ratings. He assigned "Hold" ratings to shares of Smith & Nephew PLC and Stryker Corp.
The analyst set a price target of $80 per share on Zimmer stock. The shares rose 69 cents to $67.45 in afternoon trading.
Wittes said Wright Medical is expanding by using its hip and knee business to generate cash and investing in higher growth products like foot and ankle implants. He said investor expectations for NuVasive are low, and the company may be able to surpass those expectations on the strength of its product pipeline. He set a price target of $30 per share on both stocks.
NuVasive shares rose $1.16, or 5.3 percent, to $23.32. Wright Medical added 31 cents at $21.86. Smith & Nephew fell 8 cents to $55.75 and Stryker shares rose 30 cents to $56.07.