uploads///ACQUISITIONS

Where Is Stryker’s Leading Orthopedics Business Segment Headed?

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Nov. 22 2016, Updated 8:04 a.m. ET

Orthopedics

Stryker’s (SYK) Orthopedics segment registered sales of $1.1 billion in 3Q16, representing around 38% of its total sales.

The segment’s growth came in at around 5.3% on a YoY (year-over-year) constant currency basis. Its 3Q16 sales growth was primarily driven by the strong performances of the Trauma and Extremities and Knee divisions due to continued demand for the company’s 3D printed products, its foot and ankle portfolio, and its continued uptake of the MAKO product portfolio.

Thus, the Orthopedics segment continues to exhibit strength and is growing at a steady pace. The segment aims to pursue a category leadership strategy, moving toward this goal by focusing on the five strategic dimensions outlined in the diagram above.

Stryker’s major competitors in the orthopedic device market include Johnson & Johnson (JNJ), Zimmer Biomet Holdings (ZBH), and Medtronic (MDT). The iShares Russell 1000 Growth ETF (IWF) has ~0.36% of its total holdings in SYK.

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Strategic growth plan

Stryker plans to establish differentiation in its business model through new and innovative technologies and commercial models that meet the focused needs of its customers. The company has executed this strategy in its joint replacement business by integrating its MAKO robotics technology platform and its healthcare consulting services, Stryker Performance Solutions, into its existing business, providing diversification and better value to customers.

MAKO partial knee replacements have witnessed success, and the company is very hopeful for its MAKO total knee application, which is in its early market release phase. According to Stryker, ~10% of US hospitals that perform orthopedic surgery own MAKO systems.

Stryker continues to expand its Orthopedics segment across international markets by aligning its franchises with these markets.

We discussed Stryker’s cost transformation strategy initiatives earlier in this series. The company’s Orthopedics segment aims to leverage the same strategy for its top line growth and margin expansion in the long term. Its acquisition strategy has also consistently added to its capabilities and comprehensive care portfolio.

Stryker continues to focus on inorganic growth through acquisitions in core and adjacent markets. In the above diagram, you can see the list of companies acquired by Stryker in recent years.

Next, let’s discuss Stryker’s MAKO sales and performance expectations.

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