Stryker Strikes Back
By Melissa Davis
Senior Writer
1/27/2006 12:18 PM EST
Stryker (SYK:NYSE - commentary - research - Cramer's Take) shares showed a full range of motion Friday.
The company's stock jumped 11%, hitting levels unseen since last fall, after Thursday's quarterly report. The Kalamazoo, Mich., orthopedic device maker met fourth-quarter profit targets but fell short of revenue forecasts. Stryker also issued full-year earnings guidance that due to a lower tax rate came in just ahead of current expectations.
The company's comments were mostly reassuring to investors who had been concerned on a number of fronts. Still, even a bullish analyst who upgraded the stock on Thursday failed to see the rally coming.
"Stryker's shares have pulled back recently," noted Wachovia analyst Michael Matson, when raising his rating on the stock from market-weight to outperform. "And there may be further weakness Friday, which represents a good entry point in our view."
Instead, the stock immediately soared to $49.48 -- putting it very close to Matson's target range of $50 to $54 a share.
Matson upgraded the stock due to the company's planned rollout of a new spine putty, its recent success with a high-end knee replacement and its continued strength in medical/surgical equipment sales. Notably, his upgrade had nothing to do with perhaps the biggest driver of orthopedic stocks -- pricing for artificial joints in the crucial U.S. market.
Nevertheless, his note sent other less-diversified orthopedic players soaring as well. Zimmer (ZMH:NYSE - commentary - research - Cramer's Take), which is set to report its own results on Monday, jumped 5.4% to $70.22. And smaller Biomet (BMET:Nasdaq - commentary - research - Cramer's Take) surged 6% to $37.83.
Falling Prices
Many experts saw reasons for a fall instead.
"Management said specifically for implants that pricing was down -- from flat last quarter -- as pricing pressure has increased in the U.S.," Leerink Swann analyst Jason Wittes noted on Friday. "In addition, we saw continued evidence of mix pressure. ... (So) we expect the stock to trade down this morning."
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