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How Is Stryker Expected to Gain Earnings Momentum?

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Overview

Stryker (SYK), a leading medical technology company in the United States, has a wide portfolio of products across its three business segments: Orthopaedics, MedSurg, and NeuroTech and Spine. The company has witnessed tremendous growth over the past few years. It registered strong earnings in fiscal 3Q17 and has exceeded analysts’ estimates for the past several quarters. In the recently ended quarter, Stryker reported net earnings of $434 million and adjusted diluted EPS (earnings per share) of $1.52. Though the EPS came in ahead of analysts’ expectations, its net earnings fell short of analysts’ estimate of $500 million.

In their recently ended quarters, peers Medtronic (MDT), Thermo Fisher Scientific (TMO), and BD (BDX) reported net earnings of $2 billion, $0.53 billion, and $0.33 billion, respectively. The Vanguard S&P 500 ETF (VOO) has a ~0.22% exposure to SYK.

Earnings drivers going ahead

In fiscal 3Q17, Stryker’s net earnings were impacted by the recall of certain Sage products and hurricanes. Adjusting for temporary fluctuations, its adjusted net earnings amounted to ~$578 million. The company expects to register growth due to its strong operational structure and initiatives. Also, the recent acquisitions of Novadaq Technologies, Vexim, and Entellus Medical are expected to contribute to the company’s growth and earnings.

Due to continued investment in research and development to broaden and accelerate its product portfolio, the company has suffered lower net earnings. However, as pipeline products are introduced, the company expects to provide products and solutions that will provide value and efficiency improvement to customers. Recently, in November 2017, Stryker received FDA approval for its Neuroform Atlas Stent System. For details, read Stryker’s FDA Approval Accelerates Neck Aneurysm Treatments.

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