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Here's Why You Should Retain Stryker (SYK) Stock Right Now

Stryker Corporation SYK is well poised for growth backed by robust performing robotic-arm assisted surgery platform — Mako and diversified product portfolio. However, pricing pressure remains a headwind.

Shares of Stryker have gained 13.1%, compared with the industry’s growth of 7.4% on a year-to-date basis. Meanwhile, the S&P 500 Index has rallied 15.4% in the same time frame.

Stryker, with a market capitalization of $87.16 billion, is one of the world’s largest medical device companies operating in the orthopedic market. It anticipates earnings to improve 9.6% in the next five years. Moreover, it has a trailing four-quarter earnings surprise of 16.6%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

What’s Deterring the Stock?

An unfavorable pricing environment poses a persistent threat to Stryker’s core businesses. In fact, pricing in third-quarter 2020 had an impact of 1.4% on the top line. Consequently, pricing pressure continues to weigh on its performance.

What’s Favoring the Stock?

Mako is Stryker’s robotic-arm assisted surgery platform. The company continues to witness strong demand for Mako and healthy order book despite financial constraints stemming from the COVID-19 pandemic courtesy of the platform’s unique features. This, in turn, positions the company well to sustain momentum in robot sales and recon share market gains. For 2020, the company’s Mako order book remains solid and is in sync with its aim of continued share gains in both hips and knees.

In fact, in the third quarter, the company saw an encouraging number of Mako installations both within the United States and markets outside the country. Thereby, it continues to focus on expansion of Mako. Notably, Stryker reached a milestone with the installation of its 1,000th robotic system in the third quarter and continues to witness excellent success with Mako since the launch of the total knee application in 2016. Notably, the quarter under review was no exception to the trend.

Additionally, Stryker has a diversified product portfolio. Its wide range of products offer the company immunity against any significant sales shortfall during economic turmoil. Its significant exposure in robotics, Artificial Intelligence for health care and Medical Mechatronics has provided the company with a competitive edge in the MedTech space. Stryker’s portfolio includes products like Hip, Knee and Mako robotic-arm assisted surgeries.

Apart from these, Stryker has been one of the earliest adopters of the 3D printing technology. The company’s FDA-approved Tritanium TL Curved Posterior Lumbar Cage is a 3D-printed interbody fusion cage intended for use as an aid in lumbar fixation.

Estimates Trend

For 2021, the Zacks Consensus Estimate for revenues is pegged at $16.37 billion, indicating an improvement of 13.6% from the previous year. The same for earnings stands at $9.08, suggesting growth of 26.3% from the year-ago reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space include Cardinal Health Inc. CAH, Align Technology, Inc. ALGN and Patterson Companies Inc. PDCO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cardinal Health has a projected long-term earnings growth rate of 5.4%.

Align Technology has an estimated long-term earnings growth rate of 18.3%.

Patterson Companies has a projected long-term earnings growth rate of 8.9%.

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