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Stryker Corporation (SYK): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

Posted: 3/14/2014 8:00:00 AM
Referenced Stocks: SYK;IM;BSX;CMF

Stryker continues to grow through acquisitions. Its 2014-third quarter adjusted earnings rose 10.6% year-over-year and beat the Zacks Consensus Estimate by $0.01. Revenues of $2,389 million also surpassed the mark. The company expects a 5.0 to 6.0% growth in organic revenues for 2014. However, we are concerned about the strong competition from Johnson & Johnson. Further, the merger announcements between Medtronic and Covidien, and between Zimmer Holdings and Biomet pose threat to Stryker from becoming a major medtech company. As a result, we reiterate our Neutral recommendation on Stryker and set a target price of $84.00.


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. As such, Stryker currently has three business segments: Reconstructive, MedSurg Equipment, and Neurotechnology and Spine.

The Reconstructive division (43.4% of total revenues in the first six 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 (38.4%) 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 (18.2%) 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.

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