(RTTNews) - Thursday, Credit Suisse upgraded Medtronic, Inc. (MDT: News ) shares to Outperform from Neutral and increased its price target to $49 from $41.

Analyst Stewart noted that Medtronic's base businesses, particularly cardiac rhythm management and spine, are showing signs of stability and this should continue. Medtronic is delivering on its cost savings and operating margin leverage opportunities.

The analyst said that over the next year and beyond, Medtronic would launch a series of new products across all divisions, most notably within the cardiac rhythm management and diabetes areas, which should accelerate underlying sales growth.

Based on proprietary HOLT models, the analyst concludes Medtronic's current stock prices in top line growth slowing to 3% and EBITDA margins falling 10%-points, a scenario he believes is unlikely to occur. Stability in the base business, new product launches, and continued focus on operating leverage should drive at least 10%-plus EPS growth. Trading at 11x NTM EPS, the analyst believes the risk/reward is compelling.
The analyst's survey shows Medtronic is likely to have greater stability in its CRM market share than the market currently expects. Moreover, physicians are enthusiastic about several new product launches including the MRI safe pacemaker and the next generation ICD platform. The analyst's surveys show only modest pricing pressure; volume and positive mix shift more than offset.

The analyst said that Medtronic would report its second quarter results on November 24. The analyst expects an inline quarter which should be a positive given the misses from Boston Scientific (BSX) and St. Jude (STJ). Commentary on the ICD market to ease some of the concerns. Visibility on reform should also be a positive catalyst for the stock.

Currently, MDT is up $1.71 or 4.68% and trading at $38.26.

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by RTT Staff Writer

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