Looking at Stryker Corporation's (NYSE:SYK) earnings update in December 2018, analyst consensus outlook appear pessimistic, with profits predicted to drop by -24% next year relative to the past 5-year average growth rate of 20%. Currently with a trailing-twelve-month profit of US$3.6b, the consensus growth rate suggests that earnings will drop to US$2.7b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How will Stryker perform in the near future?
The longer term view from the 28 analysts covering SYK is one of negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of SYK's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
By 2022, SYK's earnings should reach US$3.4b, from current levels of US$3.6b, resulting in an annual growth rate of -3.0%. EPS reaches $8.98 in the final year of forecast compared to the current $9.5 EPS today. The primary reason for earnings contraction is due to cost growth exceeding top-line growth of 6.5% in the next three years. With this high cost growth, margins is expected to contract from 26% to 20% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Stryker, there are three fundamental aspects you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Stryker worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Stryker is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Stryker? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.