Barron's Says Stryker (SYK) Will Be A Beneficiary As Health-Care Spending Rebounds
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Barron's published a positive piece on Stryker (NYSE: SYK) this weekend, theorizing it could benefit as baby boomers require hip, knee, spine and other joint replacements.
The recession has hurt Stryker, slowing down its historic double-digit rate of sales and profit growth. Patients have opted to delay expensive elective surgery, hurting Stryker's orthopedic-implant business, while hospitals have also cut their spending on beds and stretchers.. As a result, Stryker's shares have fallen 50% below its 2008 high of $75 to trade now at approximately at $40.
Barron's postulates that Stryker's business and shares could rebound sharply in 2010, as the economy recovers and the employment picture improves.
"As the economic situation stabilizes, a favorable exchange rate and increased health-care spending will be significant upside catalysts for Stryker's growth," Ronnie Moas, president of Standpoint Research told Barron's. Moas thinks the stock could trade between $50 and $55 in 2010.
Stryker is a large player in the $38 billion orthopedic-implant market, where it competes with Johnson & Johnson (NYSE: JNJ), Medtronic (NYSE: MDT), and Zimmer Holdings (NYSE: ZMH). Last year, SYK's orthopedic-implants business contributed 59% of total sales of $6.7 billion
Stryker has one of the strongest balance sheets in the health sector, with $2.2 billion of cash and only $20 million of debt. Stryker has generated return on equity of at least 19% for nine straight years, and produces more than $1 billion a year of cash flow.
Stryker is in the early stages of a three-year plan to spend $200 million to upgrade its quality controls and compliance system. At an analyst meeting in May, CEO Stephen MacMillan, said management is making "tremendous progress" in improving quality, but conceded "regulatory overhang in the next 12 months" is the biggest risk facing the company.
Stryker's stock has fallen 47%, to $40, from its peak. Barron's says SYK could rise to the mid-$50s as health-care spending rebounds.
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The recession has hurt Stryker, slowing down its historic double-digit rate of sales and profit growth. Patients have opted to delay expensive elective surgery, hurting Stryker's orthopedic-implant business, while hospitals have also cut their spending on beds and stretchers.. As a result, Stryker's shares have fallen 50% below its 2008 high of $75 to trade now at approximately at $40.
Barron's postulates that Stryker's business and shares could rebound sharply in 2010, as the economy recovers and the employment picture improves.
"As the economic situation stabilizes, a favorable exchange rate and increased health-care spending will be significant upside catalysts for Stryker's growth," Ronnie Moas, president of Standpoint Research told Barron's. Moas thinks the stock could trade between $50 and $55 in 2010.
Stryker is a large player in the $38 billion orthopedic-implant market, where it competes with Johnson & Johnson (NYSE: JNJ), Medtronic (NYSE: MDT), and Zimmer Holdings (NYSE: ZMH). Last year, SYK's orthopedic-implants business contributed 59% of total sales of $6.7 billion
Stryker has one of the strongest balance sheets in the health sector, with $2.2 billion of cash and only $20 million of debt. Stryker has generated return on equity of at least 19% for nine straight years, and produces more than $1 billion a year of cash flow.
Stryker is in the early stages of a three-year plan to spend $200 million to upgrade its quality controls and compliance system. At an analyst meeting in May, CEO Stephen MacMillan, said management is making "tremendous progress" in improving quality, but conceded "regulatory overhang in the next 12 months" is the biggest risk facing the company.
Stryker's stock has fallen 47%, to $40, from its peak. Barron's says SYK could rise to the mid-$50s as health-care spending rebounds.
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