This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Stryker's Stock Looks Pricey

NEW YORK ( TheStreet) -- Assessing whether a stock is a "value play" or a "value trap" has become a popular hobby for financial writers.

Although some companies may deserve bullish considerations on the basis on their own performances, some have to be assessed on a relative basis. That is to say, if company X is doing this, then company Y should be doing that.

Though this form of appraisal is not an exact science, it's nonetheless where Stryker (SYK - Get Report) is today -- fairly or unfairly.

Although Stryker undoubtedly has a strong position in the orthopedic and medical technology market, where it competes with (among others) Johnson & Johnson (JNJ - Get Report) and Medtronic (MDT - Get Report), Stryker's valuation has outpaced its performance. It's up 26% year to date. And on the heels of soft first-quarter numbers, it's time for the stock to take a pause.


Unassuming First Quarter

Prior to the company's first-quarter results, shares had already gained 20% on the year. Stryker needed to deliver (at least) in-line results to push the stock higher. Unfortunately, the overall performance fell a bit short. Revenue increased 1.3% to $2.19 billion, missing the Street's estimates by a slim margin.

There was also very little excitement in Stryker's segment performance as sales in the reconstructive device business grew just 1%, even though it was closer to 5% on an organic basis. Likewise, the surgical-products business continues to be sluggish as revenue was nearly flat. The company was able to offset this with a better-than-expected showing in its neurotechnology segment.


The company also posted decent gains in the spine business, which grew revenue 4% year over year. It's a solid performance. I do wonder, though, how long Stryker can rely solely on the strength of the spine and the neurotech businesses. Elsewhere, reconstructive devices were unimpressive. But Johnson & Johnson's performance in that business didn't overwhelm, either.

Although I'm willing to look the other way here and excuse the weakness in the reconstructive devices as a general market event, it still looks as if Stryker is losing share in that area to Johnson & Johnson. Profitability wasn't any better as Stryker posted a 13% decline in net income due to (among other things) a recall of the company's hip implants.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
JNJ $102.34 -0.85%
MDT $78.03 -1.01%
SYK $92.44 -3.72%
AAPL $129.36 0.21%
FB $79.60 -0.19%

Markets

DOW 18,203.37 -85.26 -0.47%
S&P 500 2,107.78 -9.61 -0.45%
NASDAQ 4,979.9010 -28.1950 -0.56%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs