EUR 850.00 For Business Accounts Only

Morningstar | We See Much to Like in Stryker’s Wide Economic Moat

Stryker remains a top-tier competitor in several attractive medical markets, including orthopedic implants, medical and surgical equipment, and neurovascular products. It enjoys a long record of innovation in its key markets, and we anticipate the pattern will continue, allowing the wide-moat company to earn attractive economic profits. In contrast to rival Zimmer Biomet, Stryker has sought to diversify and ease its reliance on large joint implants. The benefit of this strategy became clear as the Great Recession pushed the orthopedic market into slow-growth mode, demonstrating that the historically recession-resistant business was indeed vulnerable when many uneasy patients deferred elective procedures. Stryker is also relatively less vulnerable to increased pricing pressure on hips and knees. We have always liked Stryker's presence in the medical-surgical equipment area, as it offers a measure of stabilization and diminishes the impact of periodic economic downturns. The varied product lines also mean Stryker has more opportunities to engineer meaningful innovation, which is critical to gaining pricing advantages. Stryker continues to pursue its strategy of augmenting internal innovation with acquisitions of specific technology, including Patient Safety Technologies, Small Bone Innovations, Sage, Mako, and K2M. This fits into the firm's larger goal of partnering more closely with its hospital customers across multiple device and equipment categories.While we see few opportunities for optimizing synergistic innovation across Stryker's divergent business segments, the extensive breadth of products should, nonetheless, serve Stryker well as hospital customers seek to consolidate suppliers in order to take advantage of volume discounts. Moreover, Stryker management has demonstrated an acute understanding of new opportunities for med-tech competitors that have arisen thanks to the shift toward value-based reimbursement that has squeezed providers. We anticipate Stryker will continue to make strategic acquisitions of technology and products that aim to avoid complications or cut costs.