Current Price: $215 Price target: $240
Position size: 2.79% 1-year Performance: +36%
Key Takeaways:
Stryker released 3Q19 results with organic sales up +8.6%, a sequential decline – if you exclude 1% from the extra selling day – that bears are hanging on to. Pricing was somewhat negative across the segments this quarter, but made up largely by volume growth. The K2M salesforce integration is somewhat slower than expected, impacting the spine segment’s performance, but this should be resolved in the coming quarters. The operating margin improved 50bps y/y thanks to lower SG&A and R&D.
Results by segments:
· Orthopedics organic sales were up +8.8%. There were 51 Mako robots sold (vs. 37 in 3Q18), in spite of the competitive Rosa launch by Zimmer.
· MedSurg organic sales were up +8.8%.
· Neurotechnology and spine organic sales up +7.6%.
The management team reiterated their guidance for the year (7.5-8% organic sales growth), although seeing the higher end as most likely. Overall the thesis on SYK is intact.
SYK Thesis:
- Consistent top and bottom line growth in the mid and upper single digits respectively
- Continued operating leverage of current infrastructure
- Strong balance sheet and cash flow used in the best interest of shareholders
$SYK.US
[tag SYK]
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109