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Here's Why You Should Hold On to Stryker (SYK) Stock Now

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Here's Why You Should Hold On to Stryker (SYK) Stock Now

Challenging global economic conditions and supply-side issues are major deterrents to Stryker's (SYK) top line in the near term. The company's significant exposure to robotics is a positive.

With a market capitalization of approximately $63.54 billion, Stryker Corporation’s SYK acquisition-driven strategy is expected to boost growth by expanding existing product offerings across all business segments.

Which Way are the Estimates Treading?

For the current quarter, the Zacks Consensus Estimate for earnings is pegged at $1.68, reflecting an increase of 10.5% on a year-over-year basis. The same for the revenues is pegged at $3.26 billion, reflecting an increase of 8.5% year over year.

For 2018, the Zacks Consensus Estimate for revenues is pegged at $13.53 billion, reflecting growth of 8.8%. The same for earnings is pegged at $7.25 per share, up 11.7% year over year.

The stock has a Zacks Rank #3 (Hold). Here we take a quick look at the primary factors that have been plaguing Stryker and discuss the prospects that ensure near-term recovery of the stock.

Stryker Corporation Price and Consensus


Stryker Corporation Price and Consensus | Stryker Corporation Quote

What's Deterring Stryker?

Stryker has been grappling with supply issues in the Puerto facility for long. In fact, international growth in the Spine segment during the second quarter of 2018 was partially impacted by supply headwinds. In the second quarter, the core segment witnessed mid-single-digit pricing declines, in spite of good performance by the Tritanium implant products. However, in the last reported quarter, the company announced that it expects no material impact related to Puerto Rico supply issues in the upcoming quarters.

Consequently, Stryker underperformed the industry in a year's time. The company’s shares have returned 21.9% compared with the industry's rise 22%. The current level is higher than the S&P 500’s return of 18.4%.

Why Should You Still Hold?

Stryker’s significant exposure in robotics, Artificial Intelligence and medical mechatronics is likely to provide it with a competitive edge in the MedTech space.

Mako is Stryker’s robotic-arm assisted surgery platform. Recently, Stryker launched the robotic-arm assisted total knee arthroplasty application for use with the Mako system. Notably, this is the first and only robotic technology which can be used for total knee, hip and partial knee replacement procedures. Mako Total Knee utilizes Stryker’s robotic platform and the Triathlon Total Knee system, guided through CT-based 3D modeling of bone anatomy. The system also enables intra-operative planning and assists in bone resectioning procedures.

During the second quarter, the Mako Total Knee platform witnessed significant year-over-year increase in new robot installations. In the reported quarter, the company installed a total of 39 robots globally with 29 in the United States compared with a total of 26 in the year-ago quarter, of which 20 were in the United States.

Want More from the MedTech Space?

A few better-ranked stocks in the MedTech space are Penumbra, Inc PEN, Integer Holdings Corporation ITGR and Illumina, Inc ILMN. All the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Penumbra has a long-term expected earnings growth rate of 20%, while the same for Integer Holdings and Illumina is pegged at 15% and 22.1%, respectively.

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