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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 the company have gained 72.2%, compared with the industry’s growth of 41.6% in a year’s time. Meanwhile, the S&P 500 Index has rallied 58.3% in the same time frame.
Stryker, with a market capitalization of $90.76 billion, is one of the world’s largest medical device companies operating in the orthopedic market. It anticipates earnings to improve 9.6% in the next five years. Moreover, it has a trailing four-quarter earnings surprise of 18.8%, 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 persistent threat to Stryker’s core businesses. In fact, pricing in fourth-quarter 2020 had an impact of 0.8% on the top line. Consequently, pricing pressure continues to weigh on its performance.
What’s Favoring Growth?
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 2021, the company’s Mako order book remains solid and is in sync with its aim of continued share gains in both hips and knees.
During 2020, the company’s Mako install base witnessed growth of 33%, and beat another milestone with more than 100 robots sold and installed in fourth-quarter 2020. Thus, it continues to focus on expansion of Mako.
Additionally, Stryker has a diversified product portfolio. Its wide range of products shields the company 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.
During fourth-quarter 2020, the company unveiled its ASC (Ambulatory Surgery Center) sales model that leverages the company’s portfolio by offering end-to-end solutions to cater to rising demand and shifts regarding outpatient setting. Per management, the company’s sustained support for customers and focus on innovation positions it well for growth as the pandemic eventually subsides.
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.
For 2021, the Zacks Consensus Estimate for revenues is pegged at $17.07 billion, indicating an improvement of 18.9% from the previous year. The same for earnings stands at $9.05, suggesting growth of 21.8% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Hologic, Inc. HOLX, IDEXX Laboratories, Inc. IDXX and Abbott Laboratories ABT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic’s long-term earnings growth rate is estimated at 15.4%.
IDEXX’s long-term earnings growth rate is estimated at 15.8%.
Abbott’s long-term earnings growth rate is estimated at 14.1%.
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