On Jun 4, 2015, we issued an updated research report on Stryker CorporationSYK , a medical technology company, which operates through three segments - Orthopaedics, MedSurg, and Neurotechnology & Spine.
Stryker's acquisition-driven strategy is expected to boost growth by expanding existing product lines across all business segments, while an enhanced international presence should support the growth of its global business.
However, challenging global economic conditions, fluctuations in foreign currency exchange rates, lower reimbursements, and a strengthening U.S. dollar pose major headwinds for Stryker's top-line growth in the near term.
A diverse product portfolio, healthy pipeline and strategic acquisitions are key positives for the company. Apart from a strong domestic business, Stryker also remains extremely focused on international markets. In Jul 2014, Stryker had established a European regional headquarter in the Netherlands. The enhanced presence is expected to strengthen the company's brand status in Europe, aid the growth of its global business and provide operational efficiencies.
On the flip side, global economic conditions continue to pose stiff challenges. The implementation of 2.3% annual medical device excise tax, lower reimbursements for medical products & services, and longer sales cycles are major concerns.
Stryker currently derives one-third of its total revenue from international operations. A strengthening U.S. dollar continues to hurt domestic manufacturers such as Stryker. Foreign currency headwind is, therefore, materially impacting the company's international revenues and subsequently, its bottom line. Also, the orthopedic industry is highly competitive and Stryker faces strong rivalry from important players like Zimmer Holdings, Johnson & Johnson, Smith & Nephew and Biomet, Inc.
Stryker reported modest first-quarter 2015 results, with its earnings beating the Zacks Consensus Estimate and net sales coming in line with the mark. As a result, management raised the lower end of both its EPS and sales guidance for 2015. The new sales projection considers constant currency growth of 6-7% (previously 5.5-7%). Adjusted EPS for 2015 is presently expected in the range of $4.95-$5.10 (previously $4.90-$5.10).
Currently, Stryker carries a Zacks Rank #3 (Hold).
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