COVID-19 Buffets Stryker's Fourth Quarter but Does Not Diminish Its Wide Moat

The rise and fall of COVID-19 variants shaped the trajectory of Stryker’s fourth quarter, but as full-year results generally met our projections, we haven’t shifted our underlying assumptions materially. Nonetheless, we’ve incrementally raised our fair value estimate to $195 per share to reflect time value of money. The decline of the delta variant gave Stryker a relatively strong start in the fourth quarter, but the spread of omicron in December put pressure in non-pandemic procedures as the quarter wound down. Despite the fits and starts in procedure volume, Stryker’s economic moat remains intact. For example, we saw continued strength in placement and usage of the Mako robot throughout all of 2021. The firm’s ability to support robust placement of its robot even during this turbulent time for hospitals lays the ground for an ongoing stream of consumable revenue over the longer term. Stryker has set a high bar for rivals Zimmer Biomet and Johnson & Johnson to beat when it comes to installed robots.