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Stryker Corp SYK

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Backlog for Orthopedic Procedures Grows in the U.S.; No Change to Our Fair Value Estimates

Debbie S. Wang Senior Equity Analyst

Analyst Note

| Debbie S. Wang |

Though some medical device firms indicated that April would likely be the nadir of COVID-19-related cancelations of non-pandemic medical procedures in the U.S., we continue to think that procedure volume for the orthopedic companies will remain under pressure into the second half of the year, especially now that populous states such as Florida and Texas have seen alarming rises in new SARS-CoV-2 infections. We’re holding steady on our fair value estimates for Stryker, Zimmer Biomet, and Smith & Nephew, which have baked in our projection of declines of 75% in large joint replacement procedures for the second quarter, followed by a 50% decline in the same for third quarter, before further stabilization in fourth quarter. Nonetheless, we see little in this near-term (albeit significant) disruption to procedure volume that holds implications for the wide and narrow economic moats that characterize the orthopedic device industry.

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Company Profile

Business Description

Stryker designs, manufactures, and markets an array of medical equipment, instruments, consumable supplies, and implantable devices. The product portfolio includes hip and knee replacements, endoscopy systems, operating room equipment, embolic coils, and spinal devices. Stryker remains one of the three largest competitors in reconstructive orthopedic implants and holds the leadership position in operating room equipment. Slightly more than a quarter of Stryker's total revenue currently comes from outside the United States.

Contact
2825 Airview Boulevard
Kalamazoo, MI, 49002
T +1 269 385-2600
Sector Healthcare
Industry Medical Devices
Most Recent Earnings Mar 31, 2020
Fiscal Year End Dec 31, 2019
Stock Type Aggressive Growth
Employees 40,000

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