Stryker CorporationSYK is set to report its third-quarter 2015 earnings results on Oct 22. Last quarter, the company had posted a 2.6% positive surprise. Let's see how things are shaping up for this announcement.
Factors at Play
We believe that strong momentum at the segments Trauma and Extremities, Sports Medicine, Interventional Spine and the Neurotechnology franchises will drive growth. The company's medical business and U.S. hip business have also been performing well.
We believe Stryker's innovative product pipeline is a key growth catalyst. Further, growing adoption of MAKO is expected to drive sales in the orthopedic and reconstructive surgery market. Additionally, contract wins from large hospitals in the foot and ankle business present significant growth opportunity.
However, an unfavorable foreign exchange rate and pricing pressure persist as potent headwinds.
For the third quarter, Stryker projected adjusted earnings in the range of $1.20 to $1.25 per share. Unfavorable foreign exchange is expected to hurt sales by 3.5% to 4%.
Our proven model does not conclusively show that Stryker is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP : Stryker has a Zacks ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.23.
Zacks Rank : Stryker has a Zacks Rank #3 which increases the predictive power of ESP; but when combined with a 0.00% ESP, it makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Masimo MASI , earnings ESP of +3.23% and a Zacks Rank #1.
Hologic HOLX , earnings ESP of +2.38% and a Zacks Rank #2.
ICON Public Limited Company ICLR , earnings ESP of +1.00% and Zacks Rank #2.