Execution Risk Back On The Table At Wright Medical

Orthopedic extremity specialist Wright Medical (WMGI) continues to be a frustrating "two steps forward, almost two steps backward" story, as fiscal third quarter results came in below expectations, and management lowered guidance on ongoing execution issues in the lower extremity business. Although the strength of the shoulder business is a meaningful positive, and the lower extremity business is hardly beyond repair, the company's inability to drive consistent execution relative to its own targets remains frustrating and an impediment to the stock.

I've previously said that Wright Medical is a stock to consider buying in the mid-$20s and selling in the mid-$30s, and I believe that remains the case. While the latest reset to expectations is disappointing, Wright Medical still has the potential to grow revenue at a high single-digit long-term rate and drive FCF margins into the 20%s. "Potential" is one of the dangerous words in investing, though, so investors have to at least consider the risk that Wright Medical's ongoing execution issues remain in place, and/or that rivals like Stryker (SYK) steal the company's thunder in the still-fast-growing extremities market.

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Execution Risk Back On The Table At Wright Medical