Here's Why You Should Retain Stryker (SYK) Stock Right Now
Stryker (SYK) continues to benefit from strength in the robotic-arm assisted surgery platform, Mako, and broad product portfolio. However, pricing pre...
Stryker Corporation SYK is poised well for growth backed by a robust robotic-arm assisted surgery platform, Mako, and diversified product portfolio. However, pricing pressure remains a headwind.
Shares of the company have gained 39.6% compared with the industry’s rally of 12.6% in a year’s time. The S&P 500 Index has surged 32.5% in the same time frame.
Stryker, with a market capitalization of $104.33 billion, is one of the world’s largest medical device companies operating in the orthopedic market. It anticipates earnings to improve 9.5% in the next five years. It has a trailing four-quarter earnings surprise of 16.7%, on average.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
An unfavorable pricing environment poses a persistent threat to Stryker’s core businesses. It is important to note here that the second quarter of 2021 had the same number of selling days as the second quarter of 2019 and 2020. In comparison to 2019, pricing in the second quarter had an impact of 5% on the company’s top line (0.6% compared with second-quarter 2020). Consequently, pricing pressure remains a cause of concern.
What’s Favoring Growth?
Mako is Stryker’s robotic-arm assisted surgery platform. The company continues to witness strong demand for Mako and a healthy order book, courtesy of the platform’s unique features despite financial constraints stemming from the COVID-19 pandemic. This, in turn, positions it well to sustain momentum in robot sales and recon share market gains.
During 2020, the company’s Mako install base witnessed growth of 33%, and beat another milestone with more than 100 robots sold and installed in the fourth quarter of 2020. The company continues to focus on expansion of Mako. This growth reflects demand for Stryker’s differentiated Mako robotic technology. This momentum continued in the first half of 2021 as well with advancement in the international markets.
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For 2021, the company’s Mako order book remains solid, and is in sync with its aim of continuous share gains in both hips and knees.
Additionally, Stryker has a diversified product portfolio. Its wide range of products shields the company against any significant sales shortfall during economic turmoil. Its significant exposure in robotics, Artificial Intelligence for health care and Medical Mechatronics have helped the company stay ahead of the curve in the MedTech space. Stryker’s portfolio includes products like Hip, Knee and Mako robotic-arm assisted surgeries.
In July 2021, the company officially launched the Tornier shoulder arthroplasty portfolio and introduced its first new Tornier product — the Perform Humeral Stem. The launch of this portfolio is likely to provide a competitive edge to Stryker in the shoulder market.
Per management, the company’s sustained support for customers and focus on innovation will position it well for growth, as the pandemic eventually subsides. In the second quarter of 2021, Stryker’s adjusted R&D expenses were 6.6% of net sales, which highlights its sustained commitment toward innovation. Per management, this is likely to drive new product launches.
Stryker has been witnessing an upward estimate revision trend for 2021. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 1.9% to $9.35.
The consensus mark for third-quarter 2021 revenues is pegged at $4.29 billion, suggesting growth of 14.8% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Henry Schein, Inc. HSIC, Envista Holdings Corporation NVST and Merit Medical Systems, Inc. MMSI, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Henry Schein’s long-term earnings growth rate is estimated at 13.9%.
Envista Holdings’ long-term earnings growth rate is estimated at 27.4%.
Merit Medical’s long-term earnings growth rate is projected at 13.6%.
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