Stryker Corporation (SYK) vs. Medtronic, Inc. (MDT): Which Stock’s the Better Buy?

Page 1 of 2

Medical device makers Medtronic, Inc. (NYSE:MDT) and Stryker Corporation (NYSE:SYK) are at the top of an industry on the move. Both are big names in the business, have pulled in double-digit gains to start the year, and are worth it for investors to consider adding to their portfolios. But when pitting these stocks head-to-head for your investment over the long term, which is the better buy?

Starting off with Stryker
Stryker Corporation (NYSE:SYK) did well in 2012, growing sales by more than 4% year-over-year despite falling earnings. The sluggish comeback from the recession has hurt medical device sales, but with the economy finally looking up, Stryker’s predicting good things. The company expects full-year earnings per share of between $4.25 and $4.40 in 2013, a range that would smash 2012′s result by between 25% and 30%.

Medtronic, Inc. (NYSE:MDT)Why the optimism? Stryker Corporation (NYSE:SYK) expects the orthopedics market to rise in 2013, and with nearly 44% of sales stemming from its orthopedics-centered “Reconstructive” division, the company would welcome a boost. Reconstructive sales grew by 4.4% last year, but sluggish growth from hip devices — the division’s largest unit — weighed that number down. The obesity epidemic in the United States and other advanced economies, coupled with the aging of the baby boomers, will certainly help the orthopedics division in the long run — a great opportunity for long-term investors to consider — but short-term worries could hamper growth in the near future.

The ongoing series of lawsuits against hip device recalls should worry Stryker Corporation (NYSE:SYK) investors, however. This company hasn’t been immune from the allegations that have been thrown against competitors such as Johnson & Johnson (NYSE:JNJ) : Stryker has had legal troubles following its recall of the Rejuvenate and ABG II hip stem implants last year. Stryker has nowhere near the financial power to battle lawsuits like J&J — a company whose orthopedics sales alone nearly outpace Stryker’s total revenue — and investors need to hope for a recall-free future.

Fortunately, the company’s stepped up its efforts in other areas. Stryker’s neurotechnology and spine business has grown from 14% of total sales to 18% in two years as the fastest-growing division in the company. The segment grew by more than 10% alone last year, representing some real revenue power for Stryker; if orthopedics sales pick up as expected, the company’s optimistic profit forecasts won’t seem so high after all.

Medtronic won’t be left behind
Stryker Corporation (NYSE:SYK)’s looking up, but Medtronic, Inc. (NYSE:MDT)’s not going to concede that easily. The largest purely medical device company on the market topped earnings projections last quarter and saw revenue grow 4%, and Medtronic has its own businesses demanding the attention of growth investors everywhere.

The company’s Resolute drug-eluting stent has powered its coronary business to standout growth: Over the past nine months, the division’s grown sales by 14%. It’s one of Medtronic, Inc. (NYSE:MDT)’s best-performing divisions, and the recent launch of the Resolute Integrity stent in Japan and U.S. — to “strong consumer acceptance,” according to Medtronic, Inc. (NYSE:MDT)’s most recent quarterly filing — promises more good things to come from this business.

That can’t be said about all of Medtronic’s heart-related businesses, however. The company’s mired in the cardiac rhythm management, or CRM, industry’s decline — an unfortunate trend considering the business makes up more than a quarter of Medtronic’s total sales. Its 3% decline in CRM sales over the past nine months isn’t as bad a hit as some competitors; Boston Scientific Corporation (NYSE:BSX) lost 7% in full-year CRM sales in 2012 as the industry has shown no mercy to any company involved. Still, Medtronic’s high exposure to this struggling area will keep revenue growth down, especially considering that the mature CRM market isn’t expected to see much growth in the U.S. and Europe.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!