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Stryker Is One Stock Worth Overpaying For

Aug. 06, 2018 12:30 AM ETStryker Corporation (SYK)17 Comments
The Dividend Bro profile picture
The Dividend Bro


  • Stryker has raised its dividend for the past 25 years.
  • Second-quarter earnings showed robust organic growth, something the company knows a lot about.
  • Hip and knee replacement surgeries are expected to increase drastically over the next decade and a half.
  • Stryker, with its Mako robot, is in a prime position to capitalize on this.

After making 16 purchases in the first half of 2018 in the March to Freedom Fund, my wife and I managed just one purchase in July. We added Stryker (NYSE:SYK) to our portfolio at the end of July. We’ve spent the last year or so attempting to build up positions instead of adding new ones. Stryker is just the second new position we’ve opened this year.

Why add Stryker now?

I’ve long wanted to own this medical device maker because it is an earnings growth machine. Stryker suffered just a $0.01 decline in earnings from 2008 to 2009, a time when most companies were suffering double-digit drops in EPS. From 2008 through 2017, Stryker had a compound annual growth rate of 14%.

Recent quarterly results showed that the company continues to grow. The company announced 2nd quarter earnings on July 24th. Earnings per share were $1.76 in the quarter, $0.03 above estimates and 15% higher year over year. Stryker grew sales 10% to $3.32 billion, which came in $10 million ahead of expectations.

Organic growth company-wide was almost 8% during Q2, led by a 12% organic growth figure for Neurotechnology and Spine. MedSurg saw strong demand for its power tools, helping the division improve 7% organically.

While each division of Stryker had solid organic growth, it was Orthopedics that stood out to me. This division posted 7% organic growth, with hip and knee procedures growing 4.3% and 8.5%, respectively. Competitor Johnson & Johnson (JNJ) had growth of just 1.2% in hip procedures and saw a 2.2% drop in knee procedures. This has occurred several times in the last couple of quarters.

Hip and knee procedures are growing industry wide, with 7 million Americans already having received at least one of these operations. Hip replacement surgeries are expected to grow 174%

This article was written by

The Dividend Bro profile picture
Just a guy with an interest in the stock market. Trying to find good companies with good yields so I can retire. Check out my TipRanks page for my track record and picksWe are long: Energy: CVX Finance: JPM AFL MA V TDIndustrials: LMT MMM HON CMI GD RTX CAT SWK UPSTeleco: T VZConsumer Staples: KO PG GIS PEP MKC DG COST KMB ULConsumer Discretionary: SBUX DIS NKE TGT VFC MCD HD LOWTech: MSFT APPL CSCO ADP GOOGLHealthcare : ABBV ABT JNJ CVS SYK PFE AMGN REITs: O WPCUtilities: D SO NEE DUK

Analyst’s Disclosure: I am/we are long SYK, JNJ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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