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Conmed Corporation (CNMD)

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We downgrade our recommendation on Conmed Corporation (CNMD) to Underperform. Its earnings and revenues for the second quarter missed the Zacks Consensus Estimates. All business segments, except the Arthroscopy business, hampered growth and sales. Conmed has lowered its guidance for 2012.

The company competes in the orthopedic surgery market against much larger, more technically-competent companies with deeper pockets. It continues to face a weak capital purchasing environment. We are also keeping an eye on Conmed's multiple given the current headwinds.

Thus, we downgrade our recommendation on Conmed to Underperform with a price target of $27 based on 15.3x our fiscal 2012 earnings estimate. Over the last five years, the company's shares have traded in a range of 8.9x to 22.6x, trailing 12-month earnings.

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