Stryker Corporation SYK is well-poised for growth, backed by a robust robotic arm-assisted surgery platform, Mako, and a diversified product portfolio. Meanwhile, an improvement in price also buoys optimism.
Shares of this Zacks Rank #3 (Hold) company have risen 18.4% year to date compared with the industry’s 10.5% growth. The S&P 500 Index has increased 18.2% in the same time frame.
Stryker, with a market capitalization of $134.6 billion, is one of the world’s largest medical device companies operating in the orthopedic market. It anticipates earnings to improve 10.8% in the next five years. SYK’s earnings yield of 3.4% compares favorably with the industry’s 0.6%.
Image Source: Zacks Investment Research
What’s Favoring Stryker’s Growth?
The company continues to witness strong performance across its segments in the United States. Strong International sales also buoy optimism. The momentum continued on the back of ongoing procedural recovery, a strong order book for capital equipment and an improvement in price last year. These positive trends are likely to continue for the rest of 2024 as well.
SYK is committed to the continued expansion of Mako, with launches in new countries. It remains confident about robust growth in Mako revenues in 2024, on the back of continued adoption, new launches and software upgrades.
The second-quarter results reflect Stryker’s efforts to promote the advanced surgery platform.
SYK also boasts a diversified product portfolio. Its wide range of products protects it against any significant sales shortfall during economic turmoil.
The company’s significant exposure to robotics and artificial intelligence for healthcare and Medical Mechatronics has helped it stay ahead of the curve in the MedTech space. Its portfolio includes Mako, as well as products for hip and knee surgeries.
Stryker Corporation Price
Stryker Corporation price | Stryker Corporation Quote
Per management, Stryker’s constant support for customers and focus on innovation poise it for growth as the effect of the pandemic subsides. In the second quarter of 2024, the company’s adjusted research and development expenses accounted for 6.7% of net sales, highlighting its strong commitment to innovation. Per management, this is likely to drive new product launches.
Earlier this month, Stryker announced the launch of its Pangea Plating System, which received FDA clearance in late 2023. Pangea System is likely to provide variable-angle plating for a range of patient demographics, and its portfolio is both extensive and adaptable.
Apart from organic growth, Stryker is also gaining from acquisitions. The company inked two deals in August to acquire care.ai and Vertos Medical. While care.ai will add artificial intelligence (AI)-assisted virtual care workflows, smart room technology and ambient intelligence solutions, Vertos Medical will expand SYK’s minimally invasive pain management portfolio with differentiated treatments. The company also completed the acquisition of MOLLI Surgical, a privately held company specializing in the development of wire-free soft tissue localization technology for breast-conserving surgery.
In June, the company entered into a definitive agreement to acquire Artelon, a privately held company that specializes in innovative soft tissue fixation products for foot and ankle and sports medicine procedures.
Moreover, Stryker is adopting several cost-cutting measures, including restructuring plans. The company’s prospects in 2024 seem promising on the back of strong customer demand for its existing products as well as new launches. The adjusted selling, general and administrative expenses during the second quarter of 2024 accounted for 34% of net sales, contracting approximately 10 basis points year over year.
What’s Hurting the Stock?
An unfavorable currency rate fluctuation poses a persistent threat to SYK’s core businesses. Foreign currency had a 0.9% unfavorable impact on sales during the second quarter of 2024. The trend is likely to continue for the rest of 2024, though, at a slower pace. The company is also facing inflationary pressure, leading to lower margins.
Estimate Trend
The Zacks Consensus Estimate for 2024 earnings per share is pegged at $12.00, indicating year-over-year growth of 13.2%. In the past 30 days, the bottom-line estimate for 2024 has improved 0.4%. The consensus mark for revenues is pinned at $22.37 billion, implying a 9.2% improvement year over year.
Key Picks
Some better-ranked stocks in the broader medical space that have announced quarterly results are DaVita DVA, Aspen Technology AZPN and Universal Health Services UHS, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%.
DaVita’s shares have risen 43.4% year to date compared with the industry’s 14.3% growth.
Aspen Technology has an estimated long-term growth rate of 13.1%. AZPN’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average surprise being 4.24%.
Shares of Aspen Technology have lost 4.2% year to date against the industry’s 13.5% growth.
Universal Health Services has an estimated long-term growth rate of 19%. UHS' earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.
The company’s shares have risen 48.6% year to date compared with the industry’s 39.7% growth.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>Universal Health Services, Inc. (UHS) : Free Stock Analysis Report
Stryker Corporation (SYK) : Free Stock Analysis Report
DaVita Inc. (DVA) : Free Stock Analysis Report
Aspen Technology, Inc. (AZPN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
