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Stryker's Future Looks Bright: Analysts

Stryker may be poised for significant growth in the near future, according to some analysts. Despite a number of recalls that dragged down its earnings, the company's revenue in the third quarter was strong. In addition, Stryker's acquisition of Mako Surgical has helped the company, leading to a share price increase of approximately 40%. During the third quarter, Stryker's earnings dropped by approximately 70%. In addition to two recalls, acquisition-related charges dragged down the company's bottom line. However, excluding these one-time charges shows that Stryker would have achieved earnings growth of 1% in Q3. During Q3, revenue at Stryker was $2.2 billion, a 4.8% increase. In comparison, closely-positioned rival Zimmer reported revenue growth of 4% in its last quarter. Compared to Johnson & Johnson, Stryker also fared well. During its third quarter, J&J reported a 2% revenue decline in its diagnostics and medical devices division. Last June, J&J acquired Synthes, one of Stryker's rivals. Armed with this, J&J could be in a position to challenge the orthopedic market. Stryker specializes in three main areas. These include (1) neurotechnology, spinal implants; medical surgery, (2) imaging equipment; and (3) reconstructive and orthopedic implants. During its latest quarter, revenue in all these segments grew. Stryker's reconstructive surgery segment reported revenues of $949 million in the third quarter of 2013. This represents a year-over-year growth rate of 6.5%. Since reconstructive surgery products comprise 44% of the company's total revenue, growth in this segment is good news for Stryker. In particular, hip implant sales rose by 9.3%. Trauma and extremities products also fared well, climbing 22.7% over the previous year. Stryker's neurotechnology and spine segment also fared well, pulling in $410 million in revenue. While this segment comprises less than one-fifth of total revenues, year-over-year growth of 7.7% shows that this segment is rapidly expanding. MedSurg, Stryker's second-largest segment, pulled in $792 million. While MedSurg comprises two-fifths of the company's total revenue, this segment only achieved year-over-year growth of 1.5%. Growth in MedSurg was boosted by a 10.5% increase in sales of endoscopy products. However, this division was hit by recalls, impacting revenue significantly. In total, two-thirds of Stryker's sales take place in the United States. While international sales comprise only one-third of the company's total revenue, future growth in China could help boost this. With the purchase of Trauson Holdings, a Chinese orthopedic implant manufacturer, this part March, Stryker will be well-poised for growth in emerging markets. On top of this, Stryker reported strong year-over-year growth in Europe. Sales growth in Brazil, India and China were all in the double-digit range. That said, some analysts are worried about weaknesses at Stryker. While the company's acquisition of MAKO Surgical for $1.65 billion put it in a strong opposition compared to rivals like J&J and Zimmer, some analysts consider it a risky move. In total, Stryker paid an 88% premium for Mako, an unprofitable startup that pulled in revenues of only $103 million last year.

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