Here's Why You Should Retain Stryker (SYK) Stock Right Now
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 49.1% compared with the industry’s rally of 20.7% in a year’s time. Meanwhile, the S&P 500 Index has surged 40.6% in the same time frame.
Stryker, with a market capitalization of $98.99 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 15.9%, on average.
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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 first-quarter 2021 had an impact of 0.9% on the top line. Consequently, pricing pressure remains a cause of concern.
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.
During 2020, the company’s Mako install base saw growth of 33%, and beat another milestone with more than 100 robots sold and installed in the fourth quarter of 2020. Thereby, the company continues to focus on continued expansion of Mako. This growth reflects demand for Stryker’s differentiated Mako robotic technology. This momentum continued in the first quarter of 2021 as well with advancement in the international markets.
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.
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.
Per management, the company’s sustained support for customers and focus on innovation will position it well for growth, as the pandemic eventually subsides. In the first quarter, Stryker’s adjusted R&D expenses were 6.8% of net sales, which highlights the its sustained commitment toward innovation. Per management, this is likely to drive new product launches.
Estimates Trend
For 2021, the Zacks Consensus Estimate for revenues is pegged at $17.14 billion, indicating an improvement of 19.4% from the previous year. The same for earnings stands at $9.18, suggesting growth of 23.6% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Veeva Systems Inc. VEEV, DaVita Inc. DVA and Encompass Health Corporation EHC, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Veeva Systems’ long-term earnings growth rate is estimated at 15.8%.
DaVita’s long-term earnings growth rate is estimated at 14.4%.
Encompass Health’s long-term earnings growth rate is projected at 17.3%.
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