Stryker Corp reported disappointing fourth-quarter 2014 results,
wherein both revenue and EPS lagged the Zacks Consensus Estimate. A
strong U.S. dollar continues to impede the company's top line
growth. However, we believe that Stryker's acquisition-driven
strategy is expected to boost its growth profile by expanding its
existing product offerings across all business segments. Also, the
expected FDA approval for MAKO total knee in 2015 should lead to
meaningful sales contribution in the long term. Growth prospects in
China and India are bright, though volatile foreign exchange and
pricing remain a major concern in 2015. Moreover, challenging macro
economic conditions, particularly the 2.3% medical device excise
tax, tight spending environment and tapering of reimbursements are
added concerns. As a result, we reiterate our Neutral
recommendation on Stryker and set a target price of $97.00.
Headquartered in Kalamazoo, MI, Stryker Corporation (SYK) is one
of the world's largest medical device companies operating in the
global orthopedic market. The company was founded in 1941 and sells
its offerings in more than 100 countries worldwide through
company-owned sales subsidiaries and branches as well as
third-party dealers and distributors. Stryker currently has three
business segments: Reconstructive, MedSurg Equipment, and
Neurotechnology and Spine.
Stryker reported total revenues of $9.02 billion in 2013. Total
revenues for nine months ended Sep 30, 2014 stood at $7.06 billion,
up 7.7% year over year. U.S. revenues grew 9% to $4.74 billion
while international revenues scaled 5.1% to $2.32 billion.
The Reconstructive division (43.1% of total revenues in the
first nine months of 2014) includes hip, knee, trauma-related
products and extremities implant systems. As part of the hip
offerings, the company offers a number of products designed to meet
the needs of revision hip procedures, including Restoration,
Restoration Modular, Trident Acetabular and ADM Mobile Bearing,
each of which provides surgeons with the options necessary to
address revision surgery challenges. Stryker's knee implant systems
include Triathlon, Scorpio, and Global Modular Replacement System
(GMRS) systems. The company has several product lines for trauma
and extremity implant including Intramedullary (IM) and
cephalomedullary nails, locked and non-locked plating, hip fracture
solutions, external fixation systems and bone substitutes.
The MedSurg Equipment segment (38.6%) comprises three main
divisions: Stryker Instruments (powered surgical tools), Stryker
Endoscopy (powered surgical instruments and viewing aids), and
Stryker Medical (specialty stretchers).
The new Neurotechnology and Spine division (18.3%) includes the
Neurovascular business (Target) acquired from Boston Scientific
(BSX), the spinal implant and interventional spine businesses and
the Leibinger Unit/Craniomaxillofacial (CMF) unit. The company
markets spinal implant products including cervical, thoracolumbar
and interbody systems used in spine injury, deformity and
degenerative therapies. The neurotechnology offering includes
products used for minimally invasive endovascular techniques, as
well as a comprehensive line of products for traditional brain and
open skull base surgical procedures, orthobiologic and biosurgery
products including synthetic bone grafts and vertebral augmentation
products, as well as minimally invasive products for the treatment
of acute ischemic and hemorrhagic stroke.
Stryker Corporation (SYK): Read the Full Research
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