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The U.S. Medical Products industry has been seeing steady growth of late on an ever-increasing grey population, long life expectancy and increased demand for technologically-superior medical devices. The industry has also gained from the recent deferral of the 2.3% Medical Device tax.
According to an article published in Xtalks, the Medical Device tax was responsible for a $34-million reduction in R&D spending along with a $188-million decline in overall sales.Thus, companies expect to ramp up R&D spending which will likely lend them a competitive edge over the long haul.
Baxter International BAX and Stryker Corporation SYK are two close contenders in the Medical Products space.
Notably, both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Here, we make a detailed analysis of the companies’ fundamentals to determine which stock is currently better positioned.
With a market cap of $39.54 billion, Baxter is a global medical technology company. Meanwhile, Michigan-based Stryker is one of the largest medical device companies operating in the global orthopedic market. The company has a market cap of $63.10 billion.
Factors Driving the Stocks
Stryker’s robotic-arm assisted Mako surgery platform has been consistently driving the top line. In the last reported quarter, the platform recorded 28 new robot installations, globally.
Robust demand for Baxter’s CRRT, injectable pharmaceuticals, U.S. IV solutions and peritoneal dialysis therapies is a major positive.
Baxter's shares rallied 22.6% in a year's time, edging past Stryker's return of 22.2%. The Medical Products industry returned 10.3% in the same time frame.
The Zacks Consensus Estimate for Baxter’s current-year earnings per share is pegged at $2.89, up 16.5% year over year. The consensus mark for Stryker’s current-year earnings is pinned at $7.23, reflecting 11.4% improvement year over year.
Baxter International Inc. Price and Consensus
Baxter International Inc. Price and Consensus | Baxter International Inc. Quote
The solid growth projections clearly show Baxter as a winner here.
The Zacks Consensus Estimate for Baxter’s current-year revenues is pegged at $11.37 billion, up 7.7% year over year.The same for Stryker is pinned at $13.60 billion, calling for 9.3% growth.
Stryker Corporation Price and Consensus
Stryker Corporation Price and Consensus | Stryker Corporation Quote
Thus, Stryker has a competitive edge when current-year sales estimates are taken into consideration.
Fundamental Growth Story
In 10 years’ time, Baxter’s earnings per share witnessed a negative CAGR of 5.1%, totaling $2.49 in 2017. However, Stryker’s earnings have seen a CAGR of 10.4% over the time frame, coming in at $6.49 in 2017.
Over the past 10 years, Baxter’s revenues have registered a negative CAGR of 2.1%, totaling $10.6 million in 2017. Stryker’s revenues have seen a CAGR of 8%, totaling $12.4 million in 2017.
Here too, Stryker wins over Baxter.
Our comparative analysis indicates that Stryker is positioned better than Baxter, considering current-year sales expectations and fundamentals.
Other Key Picks
A couple of other top-ranked stocks in the broader medical space are Genomic Health GHDX and Inogen, Inc. INGN.
Genomic Health has an expected earnings growth rate of 187.5%. The stock flaunts a Zacks Rank #1.
Inogen has an expected long-term earnings growth rate of 22.5% and sports a Zacks Rank #1.
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