Key Takeaways:
Current Price: $232 Price target: $293
Position size: 2.49% 1-year Performance: +8%
- Sales in the quarter declined 1% organically (+3.2% reported includes acquisition) due to Covid pressure coming back in November and December, delaying non-emergency surgeries again (which represents nearly half of its business)
- Emergency procedures did well: neurotech +5%, Medical +10%, and trauma & extremities +27% (includes Wrights acquisition)
- Adjusted operating margin expanded 90bps, adjusted EPS increased 13%
- Wright Medical integration moving according to plan – this is a big acquisition for them and will take time
- 2021 guidance:
- Organic sales growth of 8-10% from 2019 numbers (a better baseline than 2020), forecasting a recovery in 2H21
- This includes 10-12% volume growth but 1% of price decline per year
- EPS to grow 6.5% to 11% from 2019
- Margin to expand 30-50bps excluding the dilutive acquisition of Wrights
- Smaller bolt-on acquisitions going forward as SYK integrates Wrights
Overall SYK had earnings that were as expected, considering the Covid disruption, and a 2021 guidance that looks promising. We’ll keep an eye on Mako robots sales progress, as competitors launched other robots that compete with SYK. It is hard to see if the slow-down in knees comes from competition or Covid delays.
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]
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109