Stryker Posts Another Strong Quarter
With consistency that we rarely see in medical technology, Stryker has delivered another quarter of strong growth across all three of its segments.
Editor's note: At the time of publication (July 25, 2018), a family member of the analyst owned shares in Stryker (SYK) in an account managed by a third party. Morningstar has confirmed that her ownership of Stryker did not influence any ratings or analysis.
Stryker’s (SYK) second-quarter performance largely met our expectations, and the firm remains on track to hit our full-year projections. After minor adjustments to our model, we’re retaining our fair value estimate. With consistency that we rarely see in medical technology, Stryker has delivered another quarter of strong growth across all three of its segments, which translated into 8% consolidated organic growth year over year. Stryker’s impressive performance over the past two years underscores its wide economic moat, especially its intangible assets, including ongoing innovation and relationships with practitioners.
Bolstered by the placement of its Mako robot, Stryker has seen eight consecutive quarters of above-market growth in knees. For perspective, in the second quarter Stryker’s hips and knees grew 4.3% and 8.5%, respectively, while Johnson & Johnson’s hips grew 1.2% and knees declined 2.2%. We anticipate that Stryker’s strength should last at least into 2019, when rival Zimmer Biomet is expected to launch its own robot with a total knee replacement indication in 2019. However, Zimmer Biomet has been wrestling with its own significant operational and regulatory challenges, which have yet to be fully quelled. If Zimmer Biomet makes progress in putting its house in order over the second half of this year, we think it could put a little competitive pressure on Stryker’s robot placements.
In the meantime, we’re eagerly awaiting clinical data on Stryker’s robot. As we’ve discussed previously, it remains unclear whether the Mako robot (or any orthopedic robot, for that matter) improves clinical outcomes. We expect to see our first hint on this issue next spring, as more data about Mako is released. If the results are favorable, this will only add fuel to the robot fire. However, negative results could damp demand for robots.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Debbie Wang does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.