Research archive for SYK

Another of our Vestact top stocks, Stryker, was out with a quarterly update last night. Obviously we use this newsletter to report on such news, since our customers are our readers and they own Stryker.

Sometimes I feel the technological innovations in healthcare are overlooked. All the focus seems to be on the likes of software, mobile phones, wearable devices, self-driving cars, gaming, drones etc. Maybe it is because healthcare is complex and difficult to understand for the layman?

Its been a while since one of our Vestact recommended stocks got involved in a mega-deal. Medical device maker Stryker hit the news wires last night. We have often spoken about Stryker as a potential consolidator in the fragmented medical devices industry. They are debt free and have been buying up small, innovative companies and integrating them into the Stryker supply chain. Yesterday, however, they went big, $50bn big.

Last week Stryker reported first quarter results which looked solid. Sales increased 9.7% whilst adjusted earnings per share grew by 13.5% to $1.68.

Stryker 3Q numbers - Completed the purchase of NOVADAQ Technologies on the 1st of September 2017

Stryker has bought a small business called NOVADAQ, paying a massive premium, almost double the share price from Friday last. From the all time highs of 22.81 Dollars a share in March of 2014 however, it is half, the share price was 6.23 on Friday at the close. Of course, it is all relative. Still, the price tag is 11.75 Dollars a share, or 701 million Dollars. There is a break fee of 21 million Dollars, if the deal fails.

Homer Stryker was a pretty late starter, as far as business formation goes. Born in 1894, he only discovered a decade and a half into his medical career that he was most interested in orthopaedics. Fair enough, rather late than never! And sooner than Ray Croc (the McDonald's guy!). Little did Dr. Homer Stryker know that medical science would get to the point nowadays where the company he founded (and was named after him), Stryker, would be at the point where the company is responsible for Craniomaxillofacial and Spinal implats. We are talking about reconstruction of skeletal structures here, ones in which people can have multiple "parts". Knees, hips, your foot, your ankle, pins in bones, machines that help surgery (Mako), which include truly futuristic technology, after and pre care (ambulance stretchers to beds), and the original power tools business.

Stryker reported numbers post the market close. In a recent JP Morgan healthcare conference, a couple of weeks back, the company gave a great breakdown of all of their business divisions. As "they" say in the classics, a picture is worth 1000 words, download it here: 35th Annual J.P. Morgan Healthcare Conference Presentation.

Stryker reported results for their third quarter last Thursday, after the market closed. This is the kind of business that has changed significantly, keeping relevant and up to date as medical science has evolved. Knee and hip operations are more prevalent than any other time in history. More and more each and every day! Complicated stuff for us mere mortals. When you think of the business, think of a company that has three divisions, Medical and Surgical (MedSurg), which includes all the power tools, the hospital beds, the ambulance cot (beds) to more hardcore software for complicated procedures. There is also a wide array of surgical equipment, cement mixers, waste management (blood and the like), as well as even cleaners and detergents.

Sometimes markets work in mysterious ways. Last night Stryker beat earnings estimates, but lowered expectations for next quarter. The stock is down 4% premarket. The reason I am perplexed is because they actually raised estimates for the full year. Estimates for the year increased, but the market is only focussing on next quarter. Sounds like an opportunity to me. Long term shareholders will not be too upset however, the stock is up nearly 30% year to date and it is the best performing stock in the Vestact portfolio so far this year. Let us look at the numbers.

Stryker reported numbers two evenings back. Here goes: Stryker reports first quarter 2016 results. Over here at Vestact we are not big ones for knowing where consensus is, and second guessing how the stock price will react. Often the stock price reacts in a very different way to what you think, anyhow. As we often try and get across, you are the owner of the business. The share price represents what the relative prospects are, on all the news available and that you know, as well as projections, as priced by the collective market. If the market perceives the earnings trajectory to be sharply higher, you can bet your bottom Dollar that the stock will trade on a much higher multiple relative to the rest of the market.

Stryker, the medical devices business, reported numbers last week, and guided for the year ahead -> 2015 Results and 2016 Outlook. As you can see at face value, the company had a tough year, still, it was definitely acceptable. Total sales for the year, net sales, nearly topped the 10 billion mark, 9.9 billion Dollars, net earnings of 1.4 billion Dollars was achieved. On an earnings per share basis the company chugged out 3.78 Dollars, at 99.30 Dollars where the stock closed last night it trades on a historical multiple of 26.2 times, not cheap by any stretch of the imagination.

In amongst the excitement of Thursday evenings reporting came that of Stryker, the Third Quarter Highlights looked a little more like the Samoa checklist of their World Cup highlights. Some, not enough to please the pundits. The stock sank over four percent Friday on a day that stocks were on balance going a lot higher. After the move Friday the stock is trading flat for the year. Why the sudden slowdown in revenues, both orthopaedics and the MedSurg divisions were flat? Partly the Dollar, as you can see in constant currencies sales would have in those two divisions been around 5 percent higher year on year. The neurotechnology and spine division area nearly 10 percent in constant currency terms, 5 percent in Dollar terms. That division sadly only represents 20 percent of group revenues, the balance spread almost evening between the two aforementioned ones.

Stryker reported second quarter numbers on Thursday evening, raising their guidance for the year on an improved outlook. To borrow a line from Jim Cramer, there is always someone making money in some market. You can try, yet you will never suppress human ingenuity. We have seen technological advances in the fields of medicine, and that continues to be the case with improved hardware and software across all fields. They augment each other well, the science of medicine is more receptive to these changes. As per their website, Stryker "offers a diverse array of innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine, which help improve patient and hospital outcomes."

Stryker reported operating results for the first quarter of 2015, follow the link for all the numbers. The company is a global leader in medical equipment, better known for their selling of knee and hip replacements, as well as a whole host of other devices. Everything from a surgical drill, a saw, smart meters and high tech surgical equipment (screens and the like), to innovations like eliminating surgical smoke (important) to fluid disposal. The Neptune 2 is a fluid disposal product.