Tags: Stryker | analysts | bullish | SYK

Stryker: Analysts Bullish Despite Price Drag, Changing Healthcare

By    |   Monday, 25 June 2012 02:04 PM

Stryker (SYK) has underperformed the broader market over the past 12 months by roughly 10 percentage points, now posting a price-to-earnings ratio of 15 and paying a dividend of nearly 1.6 percent. Analysts nevertheless believe that its outlook remains positive, despite concerns about a rapidly changing healthcare environment.

Stryker is a medical technology company whose products include implants used in joint replacement and trauma surgeries; surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; neurosurgical, neurovascular and spinal devices; plus other medical device products used in a variety of medical specialties.

In the United States, most Stryker products are marketed directly to doctors, hospitals and other healthcare facilities. Internationally, its products are sold in more than 100 countries through company-owned sales subsidiaries and branches as well as third-party dealers and distributors.

Stryker reports in three business segments: Reconstructive, MedSurg, and Neurotechnology and Spine.

Reconstructive products consist primarily of implants used in hip and knee joint replacements and trauma surgeries. Stryker is one of five leading competitors in the United States for joint replacement products; the other four are DePuy Orthopaedics, a subsidiary of Johnson & Johnson (JNJ), Zimmer Holdings, Biomet, and Smith & Nephew.

MedSurg products include surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; and reprocessed and remanufactured medical devices.

Neurotechnology and Spine products include a comprehensive portfolio of products including both neurosurgical and neurovascular devices.

Stryker has a market cap of $20.79 billion in a sector, healthcare equipment and supplies, where the average company size is $4.6 billion. Its trailing 12-month P/E ratio is 15.20 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.41, compared to 2.19 for the sector.

Its projected earnings per share growth for the coming year is 12.79 percent, compared to a sector average of 10.82 percent.

Long-term growth

Wall Street is bullish on SYK, with buy or outperform calls from Merrill Lynch, Credit Suisse, Piper Jaffray, Stifel Nicolaus, Standard & Poor’s Equity Research, UBS, Deutsche Bank, and JP Morgan.

“Despite U.S. hospital spending constraints, SYK appears to be realizing a strong recovery in the medsurg market, and we are encouraged by its moves to diversify,” S&P analysts recently wrote.

“Looking ahead, we still see long-term growth opportunities for SYK's reconstructive products segment given active R&D, demographic trends, and assuming procedure trends pick up over time.”

Stryker next reports on July 18.

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