Challenges Remain for Stryker
Since that article, shares of Stryker have fallen by as much as 6%. And while the stock has recovered from those losses, Stryker is nonetheless trading around the same level as when I last discussed it. And given that the company is still marred in legal battles due to product recalls for two of its artificial hip implants, my opinion regarding the risks have heightened not only because the company just installed a new CEO, but he must also now execute against some strong headwinds imposed by the Affordable Care Act.
While Stryker does have a decent lead in the orthopedic and medical technology market -- where it competes with (among others) Johnson & Johnson
Thursday, the company will report its third-quarter results. I will be interested to hear how management addresses some of the growth challenges that lie ahead. The Street will be looking for earnings per share of $1, which would be a 3-cent improvement from the year-ago quarter. Revenue is expected at around $2.15 billion, less than 5% year-over-year growth. While that's not exactly a blowout quarter, it would still be a solid performance.
I'm also eager to hear the breakdown of Stryker's segmental performances, which has been (at best) "mixed" in the recent quarters. The company has done well in areas like orthopedics, which posted 7% year-over-year growth in the July quarter. But its MedSurg business has stagnated around 4% growth.
While it's encouraging that Stryker's hip and knee businesses are growing in mid single-digits, the company has done very little to differentiate itself from Johnson & Johnson and Abbott Labs