Investopedia: Medtronic Still Muddling Through

These are challenging times for even the best medical technology companies. Insurance companies, hospitals and national governments are pushing back hard on pricing, patient visits are down, and innovation seems stifled between modest clinical progress and a considerably more conservative FDA. Not surprisingly, then, Medtronic (NYSE:MDT) is delivering much less growth than long-term investors are accustomed to, and the near-term outlook is not looking especially strong.

The real question, though, is whether Medtronic can pull out of this rut. Even just a bit more growth at the top line would make this stock a value, but stagnant markets and the turmoil of the transition to a new CEO could keep a lid on the shares in the near term.

A Weak End to the Fiscal Year
Analysts were not expecting a great fiscal fourth quarter, but Medtronic's results were weak nonetheless. Reported revenue was flat on a constant currency basis, though adjusting for the extra week in the year-ago quarter would have bumped the growth rate to 2%. As this quarter shows, foreign sales are becoming increasingly important to Medtronic's growth. Foreign sales were up 7% (constant currency) to just under $2 billion, with emerging market growth coming in at 20%.


For the full article, please click below:
http://stocks.investopedia.com/stock-analysis/2011/Medtronic-Still-Muddling-Through-MDT-STJ-NUVA-JNJ-ABT-OFIX0526.aspx

Investopedia: Mergers In Orthopedics Could Heat Up Stocks

Companies in the orthopedics space have had a rough go of it in the last few years. The federal government launched multiple investigations regarding the sales practices of these companies and prosecutors have managed to nail several skins to the wall. At the same time, hospitals and insurers have fought back on pricing and the growth rate for the sector has suffered. Making matters worse, the recession set in and many would-be patients decided to wait to undergo procedures.

Buyouts have added some energy to this space of late. Medtronic (NYSE:MDT) absorbed Osteotech late in 2010; Johnson & Johnson (NYSE:JNJ) announced its intention to acquire Swiss spine and trauma specialist Synthes in April of this year; and just the other day Stryker (NYSE:SYK) announced that it would acquire Orthovita (Nasdaq:VITA) in an all-cash deal. Given the benefits of scale, though, there may yet be more deals to come in this sector. (For background reading, check out Investing In Medical Equipment Companies.)

To read the full piece, click below:
http://stocks.investopedia.com/stock-analysis/2011/Mergers-In-Orthopedics-Could-Heat-Up-Stocks-JNJ-MDT-SYK-SNN-ZMH-NUVA-WMGI0518.aspx

Investopedia: Does Stryker Need Further Reconstruction?

Stryker (NYSE:SYK) has been relatively active of late in recrafting its business, but the first quarter's results suggest that management's work may not be done yet. Stryker remains a good core holding for GARP-oriented investors, but management is going to need to deliver better results on the "guh" side of GARP to get the Street excited again. 

An Okay (but Not Great) Quarter
Stryker did not disappoint, per se. But analysts are not going to be thrilled with the company's numbers nevertheless. Revenue grew more than 12% on a reported basis, with core constant currency organic revenue growth of 4%. That continues a rather unfortunate trend of unimpressive growth that stretches back a few years now.

While that revenue growth met expectations, the composition is the tricky bit. The orthopedics business was flat, while the MedSurg unit was up more than 12%, with double-digit growth in instruments and endoscopy. Even though companies like Johnson & Johnson (NYSE:JNJ) and Covidien (NYSE:COV) have long done well in endoscopy and its a good repeat business, other aspects of MedSurg are more tied to hospital capital budgets - that, and the margins, are largely why analysts don't love that unit so much.

Speaking of profitability, Stryker saw better gross margin on an adjusted basis. Adjusted operating income rose 10%, but margins still contracted all the same. So, the company met its numbers but not in a way that is going to have anybody pounding the table.


Please click the link to read the piece at Investopedia:
http://stocks.investopedia.com/stock-analysis/2011/Does-Stryker-Need-Further-Reconstruction-SYK-JNJ-COV-ZMH-SNN0421.aspx

Investopedia: Meet The New Stryker

This is not your father's Stryker (NYSE:SYK) anymore. Although Stryker is still thought of first and foremost as an orthopedics company (and ortho is more than 58% of sales), the company has a sizable surgical/medical equipment business and has been using acquisitions to add more markets to its portfolio. Though Stryker is not liable to turn into a serial acquirer like Integra Life Sciences (Nasdaq:IART) used to be, or Danaher (NYSE:DHR) still is, investors should keep their eyes open to the possibility that Stryker might have a few more tricks up its sleeve and more growth potential than commonly thought. 

The Quarter Was What We Thought it Was
Stryker pre-announced its fourth-quarter results prior to a major investor conference earlier in January, so there were not many surprises in Tuesday night's report. Revenue rose 8.8% as reported (and 8.6% in constant currency), with the ortho business showing 4.5% growth. Ortho growth was helped by relative strength in hips and trauma, and hampered by weakness in spine. The MedSurg business continues to recover well, with better than 15% growth in this quarter. (For more, see Investing In Medical Equipment Companies.)

Operationally, Stryker has always been a solid performer, and this time around was no different. Gross margin increased 100 basis points (to 68.7%). Stryker ramped up its operating spending, particularly in R&D, and that took almost two and a half points out of the operating margin (after adjusting for some exceptional items). Nevertheless, adjusted earnings did grow more than 12% for the period, and the company posted year-on-year free cash flow growth once again (continuing a six-year streak). (For more, see Profitability Ratios: Introduction.)

The Road Ahead
It is still early in the reporting cycle, but Stryker's commentary on the orthopedic market was definitely more positive than that of Biomet and another large rival that recently reported earnings. With new products in the hip category, it looks like Stryker is a share-taker in the market once again, though pricing is still an issue. As an aside, though, investors who want really exciting growth in orthopedics shouldn't be looking at Stryker, Smith & Nephew (NYSE:SNN) or Zimmer (NYSE:ZMH); look instead at much smaller companies like Orthofix (Nasdaq:OFIX), Alphatec (Nasdaq:ATEC) and Nuvasive (Nasdaq:NUVA).


Please click the link for the full text:
http://stocks.investopedia.com/stock-analysis/2011/Meet-The-New-Stryker-SYK-BSX-ZMH-ATEC-BMTI0128.aspx