Reasons to Retain Stryker (SYK) Stock in Your Portfolio Now
Stryker Corporation SYK is well poised for growth, backed by a robust robotic arm-assisted surgery platform, Mako, and a diversified product portfolio. Meanwhile, improvement in price also buoys optimism.
Shares of this currently Zacks Rank #3 (Hold) company have risen 16.4% in the past year compared with the industry’s 1.7% growth. The S&P 500 Index has increased 23.8% in the same time frame.
Stryker, with a market capitalization of $112.54 billion, is one of the world’s largest medical device companies operating in the orthopedic market. It anticipates earnings to improve 10.1% in the next five years. SYK’s earnings yield of 3.9% compares favorably with the industry’s (0.8%).
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What’s Favoring Stryker’s Growth?
The company continues to witness strong performance across its segments in the United States. Strong International sales also buoy optimism. The momentum is likely to have continued in the last quarter of 2023 on the back of ongoing procedural recovery, a strong order book for capital equipment and an improvement in price. These positive trends are likely to continue in 2024.
SYK is committed to the continued expansion of Mako, with launches in new countries. It remains confident about robust growth in Mako revenues in 2024, on the back of continued adoption, new launches and software upgrades.
The third-quarter results reflected Stryker’s efforts to promote the advanced surgery platform.
SYK also boasts a diversified product portfolio. Its wide range of products protects it against any significant sales shortfall during economic turmoil.
The company’s significant exposure to robotics and artificial intelligence for healthcare and Medical Mechatronics has helped it stay ahead of the curve in the MedTech space. The company’s portfolio includes Mako as well as products for hip and knee surgeries.
Per management, Stryker’s constant support for customers and focus on innovation poise it for growth as the effect of the pandemic subsides. In the first nine months of 2023, the company’s adjusted research and development expenses were 6.6% of net sales, highlighting its strong commitment to innovation. Per management, this is likely to drive new product launches.
In 2022, SYK launched a new Spine Guidance Software — Q Guidance System — for spine application. The Q Guidance system showed promising launch uptake during the first half of 2023. In July, the company commercially launched its Q Guidance system with Cranial Guidance software in the United States.
The same month, Stryker also launched a fully autonomous guidance system, Ortho Q Guidance, designed specifically for its orthopedic customers. These two developments should continue to boost revenues in 2024.
In September, Stryker unveiled the next generation of minimally-invasive surgical cameras, the 1788 platform. The fully-enhanced camera is expected to advance surgery outcomes across multiple specialties. The platform is compatible with the currently marketed imaging agents and adaptable to new agents and fluorescence modes as they become available.
The FDA granted 510k clearance to its Pangea systems in September, including Femur, Fibula, Tibia, Humerus and Utility. A potential launch of these two systems is likely to drive the top line going forward.
Moreover, Stryker is adopting several cost-cutting measures, including restructuring plans. The company’s prospects in 2024 seem promising on the back of strong customer demand for its existing products as well as new launches. The adjusted selling, general and administrative expenses during first nine months of 2023 were 34.4% of net sales, expanding approximately 90 basis points year over year.
What’s Hurting the Stock?
An unfavorable currency rate fluctuation poses a persistent threat to SYK’s core businesses. Foreign currency had a 0.9% unfavorable impact on sales during the first nine months of 2023. The trend is likely to have continued in the fourth quarter of 2023, though, at a slower pace. The company is also facing inflationary pressure, leading to lower margins.
Estimate Trend
The Zacks Consensus Estimate for 2024 earnings per share is pegged at $11.53, indicating year-over-year growth of 10.8%. In the past 60 days, the bottom-line estimate for 2024 has improved 0.3%. The consensus mark for revenues is pinned at $21.81 billion, implying a 7.5% improvement year over year.
Stryker Corporation Price
Stryker Corporation price | Stryker Corporation Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are DaVita Inc. DVA, Biodesix BDSX and Integer Holdings Corporation ITGR.
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 36.55%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have risen 42.7% in the past year compared with the industry’s 9.6% growth.
Biodesix, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 32.3% for 2024. BDSX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 9.76%.
Biodesix’s shares have lost 13.2% in the past year compared with the industry’s 3.2% decline.
Integer Holdings, sporting a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have rallied 43.5% in the past year against the industry’s 3.7% decline.
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