Stryker (SYK) Stock Rose Today on $1.43 Billion Lawsuit Settlement

NEW YORK (TheStreet) -- Stryker (SYK) shares closed up up 0.9% to $87.65 on Tuesday after the medical technology company agreed to pay at least $1.43 billion to settle thousands of lawsuits filed by plaintiffs who had to have surgery to remove the company's faulty hip replacement units.

The company said that the $1.43 billion figure was at the "low end of the range of probable loss to resolve these matters," though the company did not provide estimates for how many plaintiffs would be compensated.

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Watch the video below for more on Stryker's settlement:

The company did say that it expects the majority of the settlements to be paid out by the end of 2015.

The lawsuits are related to the company's 2012 recall of two hip replacement implants whose problems included corrosion.

TheStreet Ratings team rates STRYKER CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate STRYKER CORP (SYK) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SYK's revenue growth has slightly outpaced the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 11.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.46, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.47 is sturdy.
  • STRYKER CORP's earnings per share declined by 40.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, STRYKER CORP reported lower earnings of $2.63 versus $3.39 in the prior year. This year, the market expects an improvement in earnings ($4.75 versus $2.63).
  • The gross profit margin for STRYKER CORP is rather high; currently it is at 67.94%. Regardless of SYK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SYK's net profit margin of 2.38% is significantly lower than the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: SYK Ratings Report
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