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Stryker Corporation SYK is well poised for growth backed by robust performing robotic-arm assisted surgery platform — Mako and diversified product portfolio. However, pricing pressure remains a headwind.
Shares of Stryker have lost 11.2%, compared with the industry’s decline of 2.5% in a year’s time. Meanwhile, the S&P 500 Index has rallied 18.8% in the same timeframe.
Stryker, with a market capitalization of $71.73 billion, is one of the world’s largest medical device companies operating in the orthopedic market. It anticipates earnings to improve 9.3% in the next five years. Moreover, it has a trailing four-quarter earnings surprise of 3.3%, on average.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
An unfavorable pricing environment poses a constant threat to Stryker’s core businesses. In fact, pricing in second-quarter 2020 had an impact of 0.2% on the top line. Consequently, pricing pressure continues to weigh on its performance.
What’s Favoring the Stock?
Mako is Stryker’s robotic-arm assisted surgery platform. The company continues to witness strong demand for Mako and healthy order book despite financial constraints stemming from the COVID-19 pandemic courtesy of the platform’s unique features. This, in turn, positions the company well to sustain momentum in robot sales and recon share market gains. For 2020, the company’s Mako order book remains solid and is in sync with its aim of continued share gains in both hips and knees. In fact, the company saw promising number of Mako installations in the United States in the second quarter.
Additionally, Stryker has a diversified product portfolio. Its wide range of products provide the company immunity against any significant sales shortfall during economic turmoil. Its significant exposure in robotics, Artificial Intelligence for health care and Medical Mechatronics has provided the company with a competitive edge in the MedTech space. Stryker’s portfolio includes products like Hip, Knee and Mako robotic-arm assisted surgeries.
Apart from these, Stryker has been one of the earliest adopters of the 3D printing technology. The company’s FDA-approved Tritanium TL Curved Posterior Lumbar Cage is a 3D-printed interbody fusion cage intended for use as an aid in lumbar fixation.
In second-quarter 2020, Stryker’s adjusted R&D expenses were 7.6% of net sales. Per management, this is likely to drive new product launches.
For 2020, the Zacks Consensus Estimate for revenues is pegged at $13.90 billion, indicating a decline of 6.6% from the prior-year quarter. The same for earnings stands at $6.29, suggesting a fall of 23.9% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and PerkinElmer, Inc. PKI. While both PerkinElmer and Thermo Fisher sport a Zacks Rank #1 (Strong Buy), West Pharmaceutical carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
West Pharmaceutical has a projected long-term earnings growth rate of 17.4%.
Thermo Fisher has an estimated long-term earnings growth rate of 15%.
PerkinElmer has a projected long-term earnings growth rate of 17.4%.Today's Best
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