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Stryker Gains Ground on MAKO Robotic Unit Amid Forex Woes


On Nov 28, we issued an updated research report on Stryker Corporation SYK. The company’s acquisition-driven strategy is expected to boost growth by expanding existing product offerings across all business segments.

However, challenging global economic conditions, supply side issues, fluctuations in foreign currency exchange rates and a strengthening dollar are likely to dent top-line growth in the near term. Stryker currently carries a Zacks Rank #3 (Hold). Stryker added almost 35% in the last year, much higher than the broader industry’s return of 23.5%.

Stryker’s wide range of products shields the company against any significant sales shortfall during economic downturns. The company’s pipeline includes products like Hip, Knee and Mako Robotic-Arm Assisted Surgeries.

In fact, solid performance in the MAKO robotic platform has been boosting revenues for long. At the end of the last reported third quarter of 2017, Stryker sold a total of 33 robots and continues to update robots in the field with the Total Knee application.

Stryker has been following an acquisition-driven strategy to boost its inorganic growth profile. Recently, the company announced plans to acquire France-based VEXIM.

VEXIM's portfolio is highly complementary to the interventional spine business of Stryker's Instruments division. Key products in the segment include an extensive platform for vertebral augmentation, vertebroplasty and radiofrequency ablation procedures.

In September, Stryker completed the buyout of NOVADAQ for a net purchase price of $674 million to boost its visualization platform.

On the flipside, Stryker recently announced the voluntary product recall of the Oral Care lineup under its Sage-Products unit. The recall pertains to a cross-contamination issue in the Oral-care solutions which were manufactured for Stryker’s Sage unit by a third-party supplier. Notably, these solutions were distributed in markets between July 2015 and August 2017.

For 2017, foreign exchange fluctuations are expected to affect net sales nominally while adjusted earnings are expected to be impacted by 10 cents per share. Net sales in the fourth quarter are expected to be impacted positively by 1%. However, Stryker expects a negative impact on adjusted net earnings per diluted share in the fourth quarter of approximately 2 cents per share.

Share Price Movement & Estimate Revision Trend

Stryker's share price movement over the past year has been favorable. The company yielded a return of almost 34.4%, better than the broader industry's 24.2%. The current level is also higher than the S&P 500’s return of 18.3%.

Meanwhile, the company’s recent earnings estimates have been impressive. The current quarter has seen seven estimates go higher in the past 60 days compared to two lower. Meanwhile, full-year estimate has seen eleven up and four down in the same time period. This had a nominal impact on the consensus estimate though consensus estimate for the current quarter rose 1% in the past two months, while full-year estimates inched up 0.2%.

Key Picks

A few better-ranked stocks in the broader medical sector are PetMed Express PETS, Luminex Corporation LMNX and IDEXX Laboratories IDXX.

Notably, PetMed Express sports a Zacks Rank #1 (Strong Buy). The company has a long-term expected earnings growth rate of 10%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex represented a return of 6.4% over the last year. The stock has a Zacks Rank #1.

IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock has climbed 39.2% over a year’s time and has a Zacks Rank #2 (Buy).

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