Current Price: $211 Price target: $240
Position size: 2.57% 1-year Performance: +33%
Key Takeaways:
Stryker released 4Q19 results with organic sales up +8%, operating margins +80bps and EPS +14%. This quarter highlighted once more the strength of SYK’s portfolio. The management team provided a conservative guidance for 2020 organic sales growth of +6.5%-7.5% (Coronavirus is not expected to have any impact as of today). While this is lower than the 2019 growth achieved, it is good to remember that the exact growth was provided in early 2019. If the market dynamics continue in 2020, getting closer to 8% is a possibility. Stryker has outgrown its medical device sector in the last 7 years by 200-250bps/year. That growth has also helped the company to expand its operating margin (30-50bps/year target). In 2019, margins expanded 40bps despite the dilutive effect of recent acquisitions and investment in ERP.
For any doubters SYK can continue on this path, here’s a reminder of the tailwinds going forward:
• Continued adoption of robotic surgery in knees and hips
• Camera launch in endoscopy
• Aspiration business in neurovascular business
• Past year acquisitions to be integrated into core (organic) sales growth
• New products in acute emergency care
Furthermore, SYK has structured its business differently from competitors: its decentralized sales force drives its team to know its markets very well (and helps identify possible targets to acquire that have similar innovative culture). SYK is becoming truly global, with significant runway in emerging markets and Europe (HSD growth that is forecasted to continue as it is gaining market share in Medsurg, knee and spine).
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
[category earnings] [tag SYK]