Yahoo Finance Here's Why You Should Add Stryker (SYK) Stock to Your Portfolio
Stryker Corporation SYK is well poised for growth, backed by a robust robotic arm-assisted surgery platform, Mako, and a diversified product portfolio. However, pricing pressure remains a headwind.
Shares of this Zacks Rank #2 (Buy) company have gained 28.5% compared with the industry’s 2.3% increase in the past six months. The S&P 500 Index has gained 0.7% in the same time frame.
Stryker, with a market capitalization of $102.86 billion, is one of the world’s largest medical device companies operating in the orthopedic market. It anticipates earnings to improve 9.7% in the next five years. SYK’s earnings yield of 3.7% compares favorably with the industry’s 0% yield.
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What’s Favoring Growth?
Stryker continues to witness strong demand for Mako and a healthy order book, courtesy of the platform’s unique features, despite financial constraints stemming from the COVID-19 pandemic. These, in turn, position it well to sustain the momentum in robot sales.
Stryker is committed to the continued expansion of Mako. Following a soft third-quarter in 2022, the Mako installations touched record-high during the fourth quarter. The company remains confident of robust growth in Mako revenues in 2023 on the back of new launches and software upgrades. The company is also progressing well with Mako in international markets. The company is focused on the continued expansion of the platform. This growth reflects the demand for Stryker’s differentiated Mako robotic technology.
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 to robotics, artificial intelligence for health care and Medical Mechatronics has helped the company stay ahead of the curve in the MedTech space. Stryker’s portfolio includes products like Hip, Knee and Mako robotic-arm assisted surgeries.
On its fourth-quarter earnings call, Stryker stated that procedural volumes continue to recover in most countries after getting adversely impacted last year due to COVID. However, hospital staffing pressures remained in certain regions. It expects hospital staffing pressure to resolve gradually, leading to higher procedures in 2023.
Per management, the company’s sustained support for customers and focus on innovation poise it for growth as the pandemic subsides. In 2022, Stryker’s adjusted R&D expenses were 6.7% of net sales, highlighting its sustained commitment to innovation. Per management, this is likely to drive new product launches. In September, Stryker launched its new Spine Guidance Software — Q Guidance System— for spine application. On its fourth quarter earnings call, the company stated that the Q Guidance system has exceeded management’s expectations.
Moreover, Stryker’s cost-cutting initiatives to improve margins and actions to lessen the inflationary pressure look promising. The adjusted SG&A expenses during 2021 were 30.6% of net sales, contracting 150 basis points year over year.
Stryker Corporation Price
Stryker Corporation price | Stryker Corporation Quote
What’s Hurting the Stock?
An unfavorable pricing environment poses a persistent threat to Stryker’s core businesses. On the fourth-quarter 2022 earnings call, the company stated that the quarter’s average selling days were in line with the prior-year period. The impact from pricing was 0.6% in the last reported quarter. Consequently, pricing pressure remains a cause of concern. Moreover, unfavorable currency rate fluctuation also hurt top line growth, which may continue to impact revenues moderately in the first half of 2023.
Estimate Trend
The Zacks Consensus Estimate for 2023 earnings per share (EPS) is pegged at $10.02, indicating year-over-year growth of 7.3%. The consensus mark for 2023 revenues stands at $19.72 billion, indicating an improvement of 6.9% year over year.
Other Stocks to Consider
Some other top-ranked stocks in the broader medical space are Haemonetics HAE, Lantheus LNTH and Cardinal Health CAH.
Haemonetics, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 11.9% for fiscal 2024. HAE’s earnings surpassed estimates in all the trailing four quarters, the average beat being 10.98%.
Haemonetics has gained 4.5% compared with the industry’s 2.3% increase in the past six months.
Lantheus, sporting a Zacks Rank #1 at present, has an estimated earnings growth rate of 13.5% for 2023. HAE’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 50.00%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Lantheus is down 12.5% against the industry’s 2.3% increase in the past six months.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.43%.
Cardinal Health has gained 6% compared with the industry’s 1.8% increase over the past six months.
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