Stryker Grows via Acquisitions but M&A Deals Pose Risk - Analyst Blog

On Sep 4, we have updated our research report on Stryker Corporation ( SYK ). We are confident about the stock given its continued momentum but worried about its obstacles to become a major medtech company for some recent merger and acquisition (M&A) deals.

Stryker continues to grow through its recent acquisitions spree. In December last year, Stryker completed its acquisition of MAKO Surgical to get hold of the latter's advanced robotic arm technology known as Robotic Arm Interactive Orthopedic System (RIO). The acquisition helped Stryker gain competitive edge in the hip-and-knee replacement market.

In March this year, Stryker completed acquisitions of Irvine, CA-based Patient Safety Technologies and Sunnyvale, CA-based developer of hip arthroscopy products, Pivot Medical, Inc.

Pivot's offerings are expected to complement Stryker's existing Sports Medicine portfolio and will provide Stryker's customers with more comprehensive solutions to address certain challenges faced during current Sports Medicine procedures.

Thereafter, in April, Stryker closed the Berchtold acquisition, which is expected to boost Stryker's fast growing endoscopy division and operating room equipment product portfolio by adding complementary solutions.

However, Stryker faces strong competition from Johnson & Johnson ( JNJ ). It also faces obstacles for becoming a major medtech company from a couple of recent M&A activities. They include the merger announcements between Medtronic, Inc. ( MDT ) and Covidien plc ( COV ).

For 2014, Stryker expects to report adjusted earnings of $4.75 to $4.80 per share for full year 2014, indicating a 10.5 to 11.6% rise from 2013. The current Zacks Consensus Estimate of $4.77 lies within the guided range.

Stryker also expects organic revenues to grow in the range of 45.0 to 6.0% for 2014 compared with the earlier range of 4.5 to 6.0%. Currently, Stryker carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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