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Will Stryker (SYK) Beat Earnings Estimates this Quarter?

Zacks Equity Research

Stryker Corp. (SYK) is set to report its second-quarter 2013 results after market closes on Thursday, Jul 18. Let’s see how things are shaping up prior to the announcement.

In the last quarter, the orthopedic devices major posted a 1.98% positive earnings surprise. Organic revenue growth along with cost curtailment efforts by the company’s global quality and operations group led to the earnings beat.

Factors to Consider this Quarter

Stryker’s well-diversified product portfolio, expanding foothold in emerging markets along with acquisitions are expected to drive future growth. Recently, in an effort to strengthen its foothold in the emerging orthopedic market, the company acquired a leading China-based trauma manufacturing company, Trauson Holdings. Further, the performance of the core Reconstructive business, which has showed signs of a turnaround recently, is vital  for the company.

However, we are concerned about the impact of the warning letter from the U.S. Food and Drug Administration (“FDA”) to Stryker’s Instruments division as well as other product recalls, which are plaguing the company. Additionally, other challenges such as soft international sales, particularly in Europe, and tough hospital capital budgets pose as major headwinds.

Earnings Whispers?

Our proven model does not conclusively show that Stryker is likely to beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP (Zacks Earnings ESP: A Better Method) as well as a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks Earnings ESP:  The Most Accurate Estimate stands at $1.02, while the Zacks Consensus Estimate is pegged at $1.03. This comes to a difference of -0.97%.

Zacks Rank #3 (Hold): Stryker’s Zacks Rank #3 (Hold) lowers the predictive power of ESP. The Zacks Rank #3 together with -0.97% earnings ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right ingredients to post an earnings beat this quarter:

Sarepta Therapeutics, Inc. (SRPT), Earnings ESP of +27.78% and a Zacks Rank #1 (Strong Buy)

Zimmer Holdings, Inc. (ZMH), Earnings ESP of +0.69% and a Zacks Rank #3 (Hold)

CR Bard Inc. (BCR), Earnings ESP of +0.73% and a Zacks Rank #3 (Hold)

Read the Full Research Report on BCR

Read the Full Research Report on SYK

Read the Full Research Report on ZMH

Read the Full Research Report on SRPT

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