Goldman Sachs removed Stryker (SYK ) from its recommended list, and now rates market outperform.
Analyst Lawrence Keusch says the downgrade is based on the stock reaching fair value as supported by his discount cash flow and target price-earnings-to-growth ratios. He notes his valuation methodologies suggest a $65 fair value.
Keusch says his rating change should not be interpreted as a sign that fundamentals are weakening; they remain robust with the orthopedic implant environment marked by solid unit gains and price increases.
Keusch maintains his $1.68 2002 and $2.08 2003 earnings per share estimates. He thinks Stryker can grow earnings per share at a 20% rate. He also believes the stock represents a core holding in the medical device sector.