Navigating the stock market is not easy these days. Apart from the big tech companies, finding winners is tough. Even energy stocks came under pressure last week as oil prices retreated, despite wars in Ukraine and the Middle East.
I believe we will see strong recoveries in utilities, pipelines, telecoms, REITs and banks within the next 12 months, assuming interest rates stabilize. But where should you look right now?
How about a standout performer in a downtrodden industry?
The company is Stryker Corp. (SYK-N). The industry is health care equipment. It’s not a major part of the Canadian economy, but it’s big in the U.S. and includes such companies as Boston Scientific, GE Healthcare Technology, Abbott Laboratories and Medtronic.
The sector is in a slump right now. Year-to-date (to Nov. 10), the S&P Healthcare Equipment Select Industry Index is down 24.68 per cent. However, Stryker shares are up almost 12 per cent this year, despite a recent pullback.
Many Canadians know little to nothing about Stryker. But if you’ve ever had a hospital stay, you’ve probably been in one of their beds. Or if you’ve had an orthopedic transplant, you may be walking around with one of their artificial knees or hips in your body.
Stryker is based in Kalamazoo, Mich. It is one of the world’s largest manufacturers of prosthetic replacement joints. But that’s not all it does. It’s a leading medical technology company, with advanced products such as arms for robotic surgery. The company employs more than 50,000 people and owns 12,000 patents.
The many areas in which Stryker is involved include biosurgery, sports medicine, neurosurgery, spinal implants and much more.
The company was founded by Dr. Homer Stryker, a Michigan doctor who believed there were better ways to assist patients with orthopedic disorders. Working out of a basement room in Kalamazoo’s Borgess Hospital, he developed the turning frame, a mobile hospital bed that enabled hospital staff to reposition injured patients without causing further harm. That led to the creation of the Orthopedic Frame Company, the precursor of the existing corporation, in 1941.
Today, Stryker is a Fortune 500 company with a market capitalization of about US$105-billion.
The company reported third-quarter results on Nov. 2. Net sales were better than expected at US$4.9-billion, up 9.6 per cent year-over-year from US$4.5-billion. Net earnings also beat projections at US$692-million (US$1.80 per diluted share), although they were down 15.9 per cent year-over-year on a per-share basis.
For the first nine months of the fiscal year, sales were US$14.7-billion. That was ahead 10.8 per cent from US$13.2-billion in the prior year. Net earnings were just over US$2.2-billion (US$5.27 per share), compared with US$1.8-billion (US$4.70 per share) in the prior year.
The stock pays a quarterly dividend of 75 U.S. cents a share (US$3 annually), to yield 1.1 per cent at the current price of US$273.63.
Based on year-to-date results, a robust backlog for capital equipment and continued positive trends, Stryker now expects full-year organic net sales growth to be in the range of 10 to 10.5 per cent. Adjusted net earnings per diluted share are expected to be in the range of US$10.35 to US$10.45 (previously US$10.25 to US$10.55). The company sees steady demand for its medical and surgical devices.
We first recommended the stock in my Internet Wealth Builder newsletter in July, 2014, at US$80.44. We continue to rate it as a buy.
Gordon Pape is the editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
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