Hip to the Times: Stryker (SYK)

Hip to the Times: Stryker (SYK)

Share this post

Nobody is exempt from aging, but in the past few decades, thanks to knee and hip replacements, otherwise active seniors don’t necessarily lose their mobility. Stryker has gotten a financial leg up by capitalizing on boomer demographics and advanced prosthetic advances, growing from a small specialty firm to a large cap medical company. Just over half of the company’s business is producing artificial joints, the other half being medical/surgical supplies, specialty hospital beds, and other medical equipment. In the past few years, the company has focused on acquiring businesses in emerging medical areas such as ulcer management solutions, neurovascular advances, reconstructive surgery materials, as well as technology that allows hospitals to repurpose and reuse equipment. This should increase the company’s flexibility as medical procedures change over time.

Stryker (SYK)

Stryker has a solid financial backbone. The company has a reasonable debt-to-equity ratio and strong cash flow. Stryker’s diversity of products, together with the increase in elective joint replacement surgeries, has contributed to the company’s strong earnings growth over the past few years. There is undoubtedly some risk in the continued expansion of these surgeries in a stalled economy, and there is regulatory risk associated with delays over FDA approval of new devices. However, with 35% of Stryker’s business already overseas, there’s a world of growth opportunity abroad. The stock price jumped around in 2011; it showed solid growth during the beginning of the year and then suffered an earnings disappointment in July. Since the start of 2012 the stock has climbed 20%–much faster than the general market–and it continues to sport a healthy 1.5% dividend.

Corporate Responsibility

In its corporate responsibility report, Stryker focuses on the heart of its business: providing quality products that help patients and caregivers be safe, and offering supplemental medical education. The company is also decreasing the packaging of its products, and it collects and prepares medical devices to be reused when feasible. Other products, such as LED surgical room lighting, are designed to be energy efficient. Further, Stryker is working towards LEED certifications for all its facilities and has implemented environmental management standards at nine of them. A fixture on the Fortune “100 Best Companies to Work For” list, Stryker excels in employee development. Notably, over the 25 years that we have followed the company, and even in the seven since we last profiled Stryker in this newsletter, the company significantly improved its executive diversity: more than 40% of the board are women and minorities, a quarter of corporate officers are women.

Revenues: $8.3 Billion
2013E $4.53
2012E $4.12
2011A $3.73
Projected Annual Growth Rate: 11%
Dividend: 1.5%
52 Week High-Low: $65.21 – $43.73
Risk: Medium
Website: stryker.com