Stryker Corp. (NYSE: SYK)

Stryker Corp. (SYK) is a provider of medical technology products such as implants used in joint replacement, trauma, craniomaxillofacial and spinal surgeries; biologics; surgical, neurologic, ear, nose and throat, and interventional pain equipment; endoscopic, surgical navigation, communications and digital imaging systems; as well as patient handling and emergency medical equipment. It operates in two segments: Orthopaedic Implants and MedSurg Equipment. The Company is one of the largest players in the $35.6 billion worldwide orthopaedic market.

Founded in 1941, SYK is headquartered in Kalamazoo, Michigan.

Source: Reuters.com, SEC Filings

Financial Summary

On October 20, 2009, SYK posted Q3 2009 earnings of $0.69 per share, which was in line with the consensus of the 24 analysts following the Company, and up 4.55% over last year’s comparable quarter. Revenues came in at $1.65 billion, up 1.16% over last year’s comparable quarter. For the quarter ended September 30, SYK recorded restructuring charges of $48 million (net of income tax benefits).

For the quarter ended September 30, the Company posted net sales of $1,653 million, an increase of 1.2% on a constant currency basis (flat as reported). Orthopaedic Implants sales increased 6.9% on a constant currency basis (5.5% increase as reported) while MedSurg Equipment sales decreased 6.7% on a constant currency basis (7.7% decrease as reported)

In 2008, the Company’s revenues were $6.72 billion, up 11.96% from the previous year’s $6 billion. Meanwhile, net income was $1.15 billion, up 12.82% from the previous year’s $1.02 billion. For the said year, the Company’s cash reserves increased by 141.34%, or $410.60 million.

The Company is expected to report its next earnings on January 26, 2010.

Source: http://www.reuters.com/finance/stocks/estimates?symbol=SYK.N

Source: http://www.reuters.com/finance/stocks/ratios?symbol=SYK.N

Analyst Consensus

Analysts polled by Thomson Reuters rate shares of SYK a “Hold.”

The 17 analysts offering 12-month price targets for SYK have a median target of 50.00, with a high estimate of 67.00 and a low estimate of 40.00. The median estimate represents a 0.62% increase from the last price of 49.69.

Source: http://markets.ft.com/tearsheets/analysis.asp?s=SYK:NYQ

Investment Highlights

Since its inception in 1941, SYK has grown to become one of the world’s leading medical technology companies. It has developed the most broadly based range of products in orthopaedics and established a significant presence in other medical specialties. The Company’s products include implants used in joint replacement, trauma, craniomaxillofacial and spinal surgeries; biologics; surgical, neurologic, ear, nose and throat, and interventional pain equipment; endoscopic, surgical navigation, communications and digital imaging systems; as well as patient handling and emergency medical equipment. The Company sells its products through local dealers and direct sales force to doctors, hospitals and other healthcare facilities.

According to Wikipedia, SYK maintains a number 10 locus with total portfolio sales in excess of $6 billion as of a 2007-2008 global market overview of top medical technology firms – a figure marking an increase of approximately 20% over the previous period. It was also reported that the Company maintains 16% worldwide orthopaedic market share, retaining more of the orthopaedic market than any other of the nation’s foremost producers in the segment.

SYK recently announced it will buy device reprocessor Ascent Healthcare Solutions Inc. for $525 million in cash. Phoenix-headquartered Ascent Healthcare Solutions currently provides its services to 1,800 leading hospitals and numerous Group Purchasing Organizations throughout North America. In a press release, SYK CEO Stephen P. MacMillan stated, “The acquisition of Ascent Healthcare Solutions with its talented team will enhance our value proposition to hospitals and healthcare providers.” MacMillan added that Ascent’s programs allow its partner hospitals to divert thousands of pounds of medical waste from landfills while simultaneously redirecting substantial financial resources to patient care quality initiatives.

Earlier last month, the Company also announced it has acquired privately held software technology firm OtisMed, which will reportedly focus on customizable instrumentation that has the potential to complement the many benefits that surgeons and patients realize from the Company’s Triathlon Knee System, as well as other Stryker implants. It has also entered into definitive agreements with Japanese firm Mutoh Co. Ltd. and certain of its affiliates, and Synergetics USA Inc. (NASDAQ: SURG) to acquire assets used to produce the Sonopet Ultrasonic Aspirator control consoles, hand pieces and accessories as well as the worldwide rights to market and sell these products.

Shares of SYK were recently upgraded to “Outperform” by RBC Capital Markets, with the analyst seeing better implant revenue and equipment demand. As reported by AP, analyst Glenn Novarro “thinks the company will surpass Wall Street expectations in 2010 because hospitals are budgeting for more knee and hip replacement procedures and capital spending, which has been constrained due to the recession, will increase.”

Following a solid operating performance in the third quarter, amid challenging environment with all of its orthopaedic implant businesses, SYK expects its 2009 adjusted diluted net earnings to be in the range of $2.90 to $3.00 per share, hoping to beat the previous year’s $2.83. In the fourth quarter, the Company expects a favorable impact on net sales of approximately 3.2% to 4.2% if foreign currency exchange rates hold near September 30, 2009, levels, while an unfavorable impact on net sales of approximately 1.6% to 2.0% is anticipated for the full year of 2009.

Technical Analysis

SYK is trading above its 13 day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock

The MACD for SYK currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9day moving average. Second, the MACD is above 0 which implies that the underlying moving averages are trending higher.

SYK has been relatively stable recently. This is evidenced by the width of its Bollinger Bands which are tighter than normal. Additionally, SYK is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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