Analyst Note| Debbie S. Wang |
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.