K2M Shores Up A Weak Spot For Stryker

One of the best med-tech names out there, Stryker (SYK) doesn’t have many weaknesses, but the company’s spine business has been one notable exception. With a portfolio that has been lacking in innovation or differentiation, Stryker has seen its market share in spine drift lower against the likes of NuVasive (NUVA) and Globus (GMED) in recent years. Acquiring K2M (KTWO) is a strong step in shoring up the weakness of Stryker’s spine business, and while some investors may question Stryker’s decision to “double down” in a tough business, the long-term benefits of the move could be larger than they first appear.

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K2M Shores Up A Weak Spot For Stryker

Seeking Alpha: Stryker Seems Next In Line For A Big Deal

It's hard to find much to complain about with Stryker (NYSE:SYK). The shares aren't cheap, but then they weren't back in January and they've managed to tack on another 10%, making them one of the better performers in the group this year. I suppose I could complain that the company's solid revenue growth isn't unlocking a lot of margin leverage, but then this is a pretty efficiently run company from the off.

Looking ahead, I'm still not wild about the valuation, but I do acknowledge that Stryker has dry powder that it can deploy toward accretive M&A. I would be in no rush to sell Stryker if I owned it, but I generally like to see some discount to DCF-based or EV/rev-based fair value to make a new purchase, and I just don't see that here in Stryker's valuation.

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Stryker Seems Next In Line For A Big Deal

Seeking Alpha: Wright Medical Stumbling Toward Better Days

The share price performance of Wright Medical Group (NASDAQ:WMGI) has continued to languish in the wake of the company's announced intention to merge with Tornier (NASDAQ:TRNX). For what consolation it may bring investors, Wright Medical hasn't been alone here in 2015, as the stocks of other orthopedic players like Stryker (NYSE:SYK), Zimmer (NYSE:ZMH), and Exactech (NASDAQ:EXAC) haven't done particularly well either.

Short-term stock market performance isn't a particularly compelling way to view a stock, but there are other issues that investors need to consider here. While Wright Medical managed to avoid its fourth straight quarterly revenue miss, the company has seen the approval of its Tornier merger delayed by antitrust concerns and the approval of its Augment biologic product delayed by problems with a vendor. Wright Medical remains undervalued on the basis of what it could become in a few years' time, but investors who tend toward the less patient should probably look elsewhere for healthcare investment ideas.

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Wright Medical Stumbling Toward Better Days

Seeking Alpha: Stryker Offers Good Core Growth, But Not As Much Value

Investors who want to find high-quality med-tech names trading at meaningful discounts are going to have to hunt around, as there aren't a lot of obvious bargains on the high-quality shelves. Stryker (NYSE:SYK) remains a well-run and diversified med-tech player, and one with the flexibility to pursue value-creating M&A, but it's not trading at a valuation that would suggest that its prospects are overlooked by the market. I wouldn't sell the shares if I owned them, and there are worse things than buying a very good company at a fair price, but I can't call it a must-buy at this price.

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Stryker Offers Good Core Growth, But Not As Much Value

Seeking Alpha: Johnson & Johnson Finding Growth A Little Harder Now

The health care sector has staged a strong multiyear recovery, and Johnson & Johnson (NYSE:JNJ) has more than just gone along for the ride. Although the company has had to deal with major recalls in the consumer business and unimpressive growth in the device business, the pharmaceutical business has emerged as a real star with six blockbusters introduced in the last five years.

Nothing lasts forever, though, and 2015 is shaping up as a more challenging year. Headwinds in the pharmaceutical business appear to be coinciding with forex-related pressure and the device business is unlikely to accelerate enough to make up the difference. None of this makes Johnson & Johnson a bad company, though, and investors may want to keep an eye on these shares for the opportunity to pick up a potential long-term holding at an attractive price.

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Johnson & Johnson Finding Growth A Little Harder Now

Seeking Alpha: With The Tornier Deal On Track, Wright Medical Will Be Busy

Investors haven't been all that enthusiastic about Wright Medical (NASDAQ:WMGI) since its late October announcement of a merger with Tornier (NASDAQ:TRNX) and an approval letter from the FDA for its Augment biological product. The shares have fallen almost 20% since then, as I would imagine some investors who had held Wright Medical in anticipation of a favorable Augment outcome and/or a bid from a larger med-tech company might have decided to call it a day.

To be sure, Wright Medical's management is putting a lot on its plate. Integrating the two businesses is going to take quite a bit of energy and launching Augment will demand a high level of sales execution - it has all the hallmarks of a great product, but it won't sell itself. If Wright Medical can successfully meld the two businesses, deliver on the multi-hundred million dollar promise of Augment, and drive greater leverage in manufacturing, sales, and distribution, a fair value above $40 is possible. If management stumbles, or if the extremities market slows, the market will not be forgiving.

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With The Tornier Deal On Track, Wright Medical Will Be Busy

Seeking Alpha: NuVasive Running On Renewed MIS Vigor

Minimally invasive surgical approaches are not only here to stay in spinal care, they are likely to continue growing as a percentage of overall cases. That's great news for NuVasive (NASDAQ:NUVA), as is progress toward the sort of operating margins that would normally be expected of a quality med-tech company. While a failure to get clean operating margins above 20% looms as a long-term risk for this company, as does competition, the ongoing consolidation in the orthopedics space may well make that somebody else's problem. I'm always a little leery of jumping into a story that is already up 50% over the past year, but I can't rule out the potential upside as investors covet growth stories in med-tech with an M&A angle.

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NuVasive Running On Renewed MIS Vigor

The Motley Fool: Stryker Corporation Stock Coming Through With Growth

Stryker (NYSE: SYK  ) has been a fairly strong stock this year, and why not? The company addresses several attractive markets within med-tech and shown a willingness (and capability) to effectively deploy capital toward business-building M&A transactions. Although price weakness, particularly in ortho, is a concern and the stock's valuation isn't a screaming bargain, Stryker likely won't be a bad place to be relative to the sector.

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Stryker Corporation Stock Coming Through With Growth

The Motley Fool: Is This Huge Market Slowing Down?

Waiting for a recovery in the orthopedic market isn't exactly waiting for Godot, but it has been frustrating all the same. Between modest (but steady) price pressure, lower patient volumes, and more assertive hospital customers, major ortho companies like Zimmer (NYSE: ZMH  ) , Stryker (NYSE: SYK  ) , and Johnson & Johnson (NYSE: JNJ  ) have had their work cut out to generate better results from what has historically been one of the largest medical device markets, and a profitable one at that. 

As the second quarter earnings cycle revs up, Biomet has started things off with its fiscal fourth quarter report. Although there's nothing in the report that should worry Zimmer investors (Zimmer is in the process of trying to get regulatory approvals for its acquisition of Biomet), there is likewise not a lot to really encourage investors hoping for a major return to growth in the quarter.

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Is This Huge Market Slowing Down?

Seeking Alpha: Wright Medical And Tornier See A Desirable Partner Choose Another

It may be a little extreme to diagnose the med-tech market with buyout fever, but it's definitely a frequent talking point - particularly in the case of orthopedic extremity companies Wright Medical Group (WMGI) and Tornier (TRNX). While it may be wise advise not to own stocks just for their takeout potential, the reality is that there is a widespread expectation that major orthopedics players will look to these companies as a way of adding some extra growth (extremities markets are growing at double-digits, and likely to continue to do so for several years) and rounding out their product offerings.

A funny thing happened on the way to buyout bliss, though. Stryker (SYK), a particularly acquisitive company in the med-tech space and an ortho player with a glaring lack of extremity exposure, went and bought somebody else - announcing on Monday that it had reached an agreement to acquire privately-held Small Bone Innovations (or SBi). Stryker's move doesn't end the party for Wright Medical or Tornier, but it does cut the list of potential buyers.

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Wright Medical And Tornier See A Desirable Partner Choose Another

The Motley Fool: Why Stryker Should Buy Smith & Nephew

The M&A wheel continues to turn in med-tech, spurred on in part by the reality that making money the old fashioned way ("earning it", for those too young to remember the John Houseman commercials) is getting harder and harder. The latest rumor, that Stryker (NYSE: SYK  ) was taking a look at Smith & Nephew (NYSE: SNN  ) , was not only confirmed by Stryker but goes to show the depth of consolidation in med-tech as maturing markets leave fewer and fewer opportunities for sub-scale players.

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Why Stryker Should Buy Smith & Nephew

Seeking Alpha: A Step In The Right Direction For Tornier

I've never been particularly fond of orthopedic extremity specialist Tornier (TRNX), but even I wouldn't have expected the wild ride these shares have been on over the past year. Management's decision to shift its sales/distribution strategy has introduced a lot of noise into quarterly earnings and I believe the shares have also gotten caught up in the sell-off in riskier healthcare names. Tornier's business is still pretty messy, but the company has a very good shoulder franchise and extremities could be the next area of consolidation in the device space.

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A Step In The Right Direction For Tornier

The Motley Fool: Does Stryker's Skid Offer a Buying Opportunity?

Long-term investing is generally the way to go, but that does not mean that investors shouldn't take advantage of short-term moves that work in their favor. Stryker (NYSE: SYK  ) remains a very well-run company in the med-tech space, with good exposure to orthopedics, surgical instruments, and neurology, but a recent slide in the stock appears to have opened up a little window of opportunity in the shares.

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Does Stryker's Skid Offer a Buying Opportunity?

Seeking Alpha: Wright Medical Continuing To Gain Share In A Growth Market

While Wright Medical (WMGI) has gotten caught up in the same sell-off that has hit many other small-cap, med-tech stocks, the underlying performance of the business continues to improve. Wright Medical is outgrowing the lower extremities market, and still has balance sheet flexibility to add products or distribution in areas like extremity devices/tools and biologics. Even with the decline in the share price, this is not a cheap name, but it does offer above-average scarcity value in an increasingly acquisitive med-tech market.

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Wright Medical Continuing To Gain Share In A Growth Market

The Motley Fool: $13 Billion Bold Play: Zimmer Holdings, Inc's Purchase of Biomet

In mid-December I wrote that there was at least some chance that ortho giant Zimmer (NYSE: ZMH  ) would make a bid for Biomet and become the dominant company in hip and knee implants, as well as leverage stronger share in areas like extremities, dental, trauma, and spine. That speculation has come to pass, as Zimmer has announced a $13.35 billion bid for Biomet. Assuming the deal passes regulatory scrunity, Zimmer is likely to see meaningful cost synergy, but there are risks involved in devoting such a large amount of capital to a market with some growth challenges.

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$13 Billion Bold Play: Zimmer Holdings, Inc's Purchase of Biomet

The Motley Fool: Could Smith & Nephew Plc Be a Good Value?

Procedures volumes have started picking up and pricing pushbacks from payers has eased, leading many stocks in the orthopedics space to log good runs. Smith & Nephew plc (NYSE: SNN  ) has done better than peers/rivals like Stryker (NYSE: SYK  ) and Zimmer over the last twelve months, but oddly enough it may yet offer more value. The company's knee business appears to be regaining some share and the acquisition of Arthrocare (NASDAQ: ARTC  ) should be a highly synergistic opportunity to grow in a space that offers better prospects than major joint reconstruction.

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Could Smith & Nephew Plc Be a Good Value?

Seeking Alpha: Tornier Working Through An Awkward Transition

Extremities are the highest-growth area in orthopedics today, but Tornier (TRNX) has been on the outside looking in for the last few quarters. Large companies like Johnson & Johnson (JNJ), Biomet, and Stryker (SYK) are paying more attention to these markets as a way of augmenting slower growing hip, knee, and spine markets, but Tornier's problems are largely self-inflicted by way of its sales restructuring.

Tornier doesn't believe it is going to return to torrid growth in 2014, but the market seems to be willing to look past these issues and forward to a strong multiyear extremities market growth story. It also certainly does not hurt that large med-tech companies have started opening their wallets again and Tornier would be an attractive target for multiple companies. Tornier's intrinsic DCF-based valuation isn't so impressive at these levels, but by the EV/revenue method that is often favored in med-tech there still would seem to be worthwhile potential.

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Tornier Working Through An Awkward Transition

The Motley Fool: Stryker Corporation Offering Some Of The Best Growth Prospects In Large Med-Tech

Growth may be starting to pick up in the med-tech world, but Stryker (NYSE: SYK  ) is still finding a way to stand out from the crowd. Stryker had a surprisingly strong quarter in its reconstructive products business, and the long-term outlook for instruments, endoscopy, and neuro/spine are all appealing. Add in upside from the MAKO Surgical acquisition and, while Stryker may not be a bargain-basement stock anymore, it still holds some appeal for long-term investors.

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Stryker Corporation Offering Some Of The Best Growth Prospects In Large Med-Tech

The Motley Fool: A Sleeping Giant About To Awaken

The going has gotten tough in the orthopedic sector, and many of the major players have responded by getting going. Johnson & Johnson (NYSE: JNJ  ) acquired Synthes to become the largest in trauma and the second-largest in spine, while Stryker (NYSE: SYK  ) acquired MAKO Surgical with an eye toward getting ahead of the evolution of the hip and knee markets. Smith & Nephew has diversified into wound care and arthroscopy, while Biomet is reportedly weighing its options, including a possible IPO. That leaves Zimmer Holdings (NYSE: ZMH  ) as the next major player to move.

Zimmer has already done what many of its rivals have found hard to do -- deliver real growth in a tough major joint recon market. Zimmer's knee sales were up 7% in the latest quarter, while hips were up 2%, and recent introductions like the Persona line have helped extend the company's lead in major joint reconstruction, with more than one-quarter market share (Johnson & Johnson is a few points behind, and Stryker is even further back). With a relatively clean balance sheet and some obvious areas to improve, though, Zimmer could have a trick up its sleeve to invigorate growth.

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The Motley Fool: Strong Recon Pushing Stryker's Rebound

Although it wasn't all that long ago that Stryker  (NYSE: SYK  ) traded at a pretty meaningful discount to fair value, Wall Street has come back around to the enduring value of one of the better-run names in the sector. Helping matters greatly is a recovery in major joint reconstruction and early success with margin improvement initiatives. These shares are no longer a tremendous bargain, but they're still priced to generate decent long-term returns for long-term shareholders.

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