Company Reports

Stryker delivered strong first-quarter results that slightly exceeded our expectations on the top- and bottom lines. However, minor adjustments to our assumptions for the full year weren’t enough to materially shift our fair value estimate. With quarterly consolidated revenue up 10% in constant currency, Stryker continued to outpace the larger orthopedic devices market. We remain confident in the switching costs and intangible assets that underpin Stryker’s wide economic moat. Considering the firm remains in the early stages of commercialization for key new products, we anticipate demand can support Stryker’s above-average growth through 2024.

Stryker capped off a strong year with more of the same in the fourth quarter, and we’ve slightly raised our fair value estimate to $242 per share. On the whole, full-year orthopedics and spine results nearly hit our estimates. In contrast, instruments and endoscopy substantially exceeded our 2023 projections. Though this outperformance wasn’t enough to materially shift our valuation, we incorporated more optimistic estimates for 2024-25 that did lift our fair value estimate, reflecting the firm new product launches, and strong ongoing execution. Trends in increased medical utilization should also support stronger top-line growth. Stryker’s ability to introduce meaningful innovation reinforces our view of the firm’s wide economic moat. For instance, the rollout of the new 1788 camera—Stryker’s 26th generation product since 1978—now utilizes fluorescence and infrared imaging to show what the human eye cannot discern. This is especially helpful for visualizing blood flow through tissue that surgeons have stitched together, a critical indicator for surgical success.

Stryker remains a top-tier competitor in a number of attractive medical markets, including orthopedic implants, surgical instruments, endoscopy, and neurovascular devices. It enjoys a long record of innovation in its key markets, and we anticipate the pattern will continue, allowing the wide-moat company to earn attractive economic profits.

Stryker remains a top-tier competitor in a number of attractive medical markets, including orthopedic implants, surgical instruments, endoscopy, and neurovascular devices. It enjoys a long record of innovation in its key markets, and we anticipate the pattern will continue, allowing the wide-moat company to earn attractive economic profits.

Stryker delivered solid third-quarter results that keep the firm on track to meet our full-year top- and bottom-line expectations. Year-to-date expenses have hit our estimates nearly on the nose. Though we haven’t altered our underlying assumptions, we do plan to incrementally inch up our fair value estimate to reflect time value of money. Quarterly revenue growth was up 9% in constant currency, driven by double-digit growth from instruments, endoscopy, and spine. With Stryker in the midst of launching a number of new products, this show of consistent innovation underscores our favorable view of Stryker’s wide economic moat.

As one of the best operators in medical technology, wide-moat Stryker delivered another quarter of strong performance that slightly edged ahead of our expectations on the top and bottom lines. However, small adjustments to our near-term assumptions weren’t enough to materially shift our fair value estimate.

The strength Stryker displayed as it exited 2022 has continued full force through the first quarter, and we’ve modestly raised our fair value estimate to $217 per share after adjusting upward our expectations for the remainder of 2023. Stryker racked up another quarter of stellar growth with revenue up 14% in constant currency, though we recognize the prior-year period was rather weak due to the omicron variant. Nonetheless, Stryker’s impressive execution (especially outside the U.S.) along with increasing medical utilization lead us to believe our original projections could be too conservative. However, even with this slight boost to our intrinsic value, Stryker shares remain overvalued, from our perspective. We saw little in the quarter to change our view of Stryker’s wide economic moat.

Stryker remains a top-tier competitor in a number of attractive medical markets, including orthopedic implants, surgical instruments, endoscopy, and neurovascular devices. It enjoys a long record of innovation in its key markets, and we anticipate the pattern will continue, allowing the wide-moat company to earn attractive economic profits.

Stryker delivered stellar fourth-quarter performance on the top and bottom lines, and the full-year results fell very close to our estimates for 2022. We are leaving our fair value estimate unchanged. We’re impressed with the range of new products in launch (or expected to begin rolling out in 2023)—an array of innovation that we think should bolster Stryker’s wide economic moat by adding to its intangible assets and switching costs. However, after dialing up our projections to reflect those portfolio additions, the effect wasn’t significant enough to make a material difference to our valuation.

Though Stryker posted strong third-quarter results, continued pressure on profitability spurred management to lower its full-year outlook for gross margin, causing shares to bobble in aftermarket trading. The firm’s more conservative expectations dovetail nicely with our projections for 2022 and we’re holding steady on our fair value estimate of $200. Despite several factors dogging the business—component shortages, inflationary pressures, and slower installations of Mako robots—we view these as near-term speed bumps that do not weigh on Stryker’s long-term prospects or wide economic moat.

Stryker delivered second-quarter results that trailed our expectations in some areas but exceeded in others. Our adjustments to our full-year projections ended in a wash, but we’re incrementally inching up our fair value estimate to $200 per share, driven primarily by time value of money. Despite friction from input shortages and supply chain delays that were evident in the quarter, we’re pleased to see that patient volume is largely back to prepandemic levels, which supported 8% quarterly revenue growth in constant currency year over year. We saw little in the quarter to change our thinking on Stryker’s wide moat.

Stryker remains a top-tier competitor in a number of attractive medical markets, including orthopedic implants, surgical instruments, endoscopy, and neurovascular devices. It enjoys a long record of innovation in its key markets, and we anticipate the pattern will continue, allowing the wide-moat company to earn attractive economic profits.

Stryker kicked off this year with a fast start in first quarter and is on track to meet our full-year projections, so we’re leaving our fair value estimate unchanged. We think Stryker’s wide economic moat remains solid, thanks to its intangible assets and switching costs in orthopedics, despite a recent report from activist short-sellers. For example, Stryker just launched its new Insignia hip stem, which offers an improved fit and easier installation; we expect this will add topspin to robust quarterly hip sales that hit 9% year over year.

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.

Stryker remains a top-tier competitor in a number of attractive medical markets, including orthopedic implants, surgical instruments, endoscopy, and neurovascular devices. It enjoys a long record of innovation in its key markets, and we anticipate the pattern will continue, allowing the wide-moat company to earn attractive economic profits.

Stryker delivered a strong third quarter, helped along by the addition of Wright Medical, but softness in orthopedics led the firm to pull back on its outlook for the full year, causing shares to bobble in after-hours trading. We stick with our $190 fair value estimate, as our slight revisions to reflect further delays in orthopedic procedure volume in the near term weren’t enough to materially shift our valuation. Further, the firm remains on track with cost controls to meet our projections on the bottom line for the full year. The weakness in orthopedics and spine were more than offset by strong organic growth in medsurg and neurotech, which underscores the strength of Stryker’s wide moat, in our view. Aside from its formidable position in orthopedics, Stryker also has a long track record of generating meaningful innovation in its instruments, patient transportation, embolic coils, and thrombectomy systems for stroke patients. All of that adds to its well of intangible assets, and we surmise there may also be some switching costs associated with the stroke devices and delivery systems.

Wide-moat Stryker delivered second-quarter performance that was punctuated with sharp revenue gains over the weak prior-year period when shelter-at-home orders and rising COVID-19 viral transmission spurred many patients to delay orthopedic and other more elective procedures. Overall, the firm is on track with our full-year projections, and we’re holding steady on our fair value estimate. While some of that procedure volume recovered since the second quarter of 2020, volume levels haven’t completely returned to normal levels until this quarter, following the widespread availability of vaccines. Profitability also improved in the second quarter. While Stryker’s gross margin held up relatively well during the pandemic disruption over the last four quarters, there were notable operating margin gains as SGA expenses rose substantially slower than the top line.

Stryker posted first-quarter results that slightly exceeded our expectations on the topline and slightly trailed our projections on the bottom-line. With these two factors largely offsetting each other, we’re holding steady on our fair value estimate. We’re pleased to see that the Wright Medical integration has been coming along faster than anticipated. Stryker’s long record of acquisition and successful integration underscores one of the intangible assets that contributes to the firm’s wide economic moat. As we’ve seen before, Stryker is particularly skilled at retaining the human capital associated with acquisitions—management, engineers, and sales force. Weaving the Wright Medical management with the Stryker teams seems to be smoothing the way, and we expect cross-selling of legacy Wright products to gain steam this year.

Stryker remains a top-tier competitor in a number of attractive medical markets, including orthopedic implants, surgical equipment, endoscopy, and neurovascular devices. It enjoys a long record of innovation in its key markets, and we anticipate the pattern will continue, allowing the wide-moat company to earn attractive economic profits.

Stryker remains a top-tier competitor in a number of attractive medical markets, including orthopedic implants, surgical equipment, endoscopy, and neurovascular devices. It enjoys a long record of innovation in its key markets, and we anticipate the pattern will continue, allowing the wide-moat company to earn attractive economic profits.