Stryker Remains at Neutral – Analyst Blog

We recently assigned a ‘Neutral’ rating to Stryker Corporation (SYK) with a target price of $60 based on a P/E of 18.4x our fiscal 2010 EPS estimate of $3.26.

 

Stryker reported fourth quarter earnings per share of 82 cents, in line with the Zacks Consensus Estimate and higher than the year-ago figure of 74 cents. For fiscal 2009, earnings per share of $2.95 surpassed the year-ago figure of $2.83.

 

Total revenues increased 6.8% year over year to $1,834.2 million in the fourth quarter. Excluding a favorable foreign currency (FX) translation, net sales increased 2.5% year over year.

 

In terms of business segments: Orthopedic Implants sales increased 9.7% year over year to $1,115.6 million. Growth was led by strong demand for the company’s Hips, Knees, Trauma, Spine and Craniomaxillofacial products.

 

MedSurg Equipment sales increased 2.5% year over year to $718.6 million. Except Patient Handling and Emergency Medical Equipment, growth was registered across the company’s Surgical Equipment and Surgical Navigation systems; and Endoscopic and Communications systems.

 

Stryker reported an expansion in margins in the fourth quarter. Gross margin increased 10 basis points (bps) year over year to 67.7%. Operating margin increased 640 bps year over year to 28.0%.

 

In fiscal 2009, total revenues increased 0.1% year over year to $6,723.1 million. Excluding FX, net sales increased 1.7% year over year. Orthopedic Implants sales increased 3.8% year over year to $4,119.7 million. MedSurg Equipment sales declined 5.4% year over year to $2,603.4 million.

 

Stryker is one of the world’s largest medical devices companies operating in the global orthopedic market. In the orthopedic space, Stryker faces competition from major players like Zimmer Holdings Inc. (ZMH), CONMED Corporation (CNMD), Smith & Nephew (SNN), Johnson & Johnson/DePuy (JNJ) and Wright Medical Group, Inc. (WMGI).