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Stryker Corporation SYK is well poised for growth backed by robust robotic-arm assisted surgery platform — Mako and diversified product portfolio. However, pricing pressure remains a headwind.
Shares of the company have gained 43.5% compared with the industry’s 23.3% rally on a year-to-date basis. Meanwhile, the S&P 500 Index has surged 56% in the same time frame.
Stryker, with a market capitalization of $96.62 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. Hence, 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, courtesy of the platform’s unique features, despite financial constraints stemming from the COVID-19 pandemic. This, in turn, positions it 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 continuous share gains in both hips and knees.
During 2020, the company’s Mako install base saw 33% growth, and beat another milestone with more than 100 robots sold and installed in fourth-quarter 2020. Thereby, it continues to focus on the 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 the ASC (Ambulatory Surgery Center) sales model that leverages its portfolio by offering end-to-end solutions to cater to the rising demand and shifts regarding outpatient setting. Per management, the company’s sustained support for customers and focus on innovation will position 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 include AmerisourceBergen Corporation ABC, DENTSPLY SIRONA Inc. XRAY and Cantel Medical Corp. CMD, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AmerisourceBergen’s long-term earnings growth rate is expected at 11.4%.
DENTSPLY SIRONA’s long-term earnings growth rate is estimated at 20%.
Cantel Medical’s long-term earnings growth rate is estimated at 19%.
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Stryker Corporation (SYK) : Free Stock Analysis Report
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