Stryker Corporation SYK is well poised for growth backed by robustly performing robotic-arm assisted surgery platform – Mako, diversified product portfolio and solid international growth. However, pricing pressure remains a headwind.
Stryker, with a market capitalization of $62.09 billion, is one of the world’s largest medical device companies operating in the global orthopedic market. It anticipates earnings to improve 8.2% over the next five years. Moreover, it has a trailing four-quarter positive earnings surprise of 1.5%, on average.
What’s Deterring the Stock?
An unfavorable pricing environment poses a constant threat to Stryker’s core businesses. In fact, pricing in fourth-quarter 2019 had an impact of 0.6% on the top line. Consequently, pricing pressure continues to weigh on the company’s performance.
What’s Favoring the Stock?
Mako is Stryker’s robotic-arm assisted surgery platform. Notably, Mako Total Knee platform performed robustly in fourth-quarter 2019 on the back of significant year-over-year increase in new robot installations. In the fourth quarter, Stryker installed a total of 89 robots globally, which included 63 in the United States, compared with 54 in the year-ago quarter.
Moreover, the company continues to witness strong demand for Mako on the back of its unique features and healthy order book. For 2020, the company’s Mako order book remains solid and is in sync with its aim of continued share gains in both hips and knees.
Additionally, Stryker has a diversified product portfolio. Its wide range of products provides the company immunity against any significant sales shortfall during economic downturns. 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.
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.
In fourth-quarter 2019, the company’s international sales improved 6.2%, year over year to $1.09 billion. Organically, international sales grew 7.6%, driven by robust gains in emerging markets, Europe, Japan and Canada.
For 2020, the Zacks Consensus Estimate for revenues is pegged at $15.19 billion, indicating an improvement of 2% from the prior-year quarter. The same for earnings stands at $8.63, suggesting a rise of 4.5% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include McKesson Corporation MCK, Merit Medical Systems, Inc. MMSI and The Cooper Companies, Inc. COO, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.