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SYK vs. SRDX: Which MedTech Stock Should Investors Pick?

Zacks Equity Research

Medical Product companies Stryker Corporation SYK and Surmodics, Inc. SRDX are solid contenders in the U.S. MedTech space. Rapid innovation, major advances and aging population in the United States have sustained the popularity of healthcare stocks. Despite U.S.-China trade war-related uncertainties, 2019 is expected to witness new technologies, courtesy of the 2.3% Medical Device tax abatement along with focus on Artificial Intelligence and cybersecurity.

Considering this backdrop, it is difficult to choose between the above-mentioned companies as they have similar business models. The scales apparently look balanced as Stryker and Surmodics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, we made a detailed analysis of the companies’ fundamentals to determine which has a slight edge over the other.
Michigan-based Stryker is an orthopedic device giant and Minnesota-based Surmodics is a leading provider of medical device and In Vitro Diagnostics (IVD) technologies to the healthcare industry.

Price Performance & Style Score

In the past year, Stryker’s shares have declined 3.1% compared with Surmodics’ 67.4% surge. The Medical Products industry has declined 12.1% in the same time frame. Meanwhile, the S&P 500 index fell 12.4%.

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Reflective of these favorable price movements, Stryker has a Momentum Score of A and the same for Surmodics is B. This reflects possibilities of outperformance at the moment. Our research shows that stocks with a Momentum Score of A or B, combined with a Zacks Rank #1 or 2, are better picks than most.

Which Way are Estimates Treading?

Earnings

The Zacks Consensus Estimate for Stryker’s fourth-quarter earnings per share (EPS) is pegged at $2.16, reflecting an improvement of 10.2% year over year. Surmodics’ fiscal first-quarter loss per share is pegged at a penny, showing year-over-year decline of 110%.

Stryker Corporation Price and Consensus

 

Stryker Corporation Price and Consensus | Stryker Corporation Quote

Sales

The Zacks Consensus Estimate for Stryker’s current-quarter revenues is pegged at $3.73 billion, suggesting growth of 7.5% from the previous year. The same for Surmodics is pegged at $18.90 million, reflecting a rise of 11.1% year over year.

Surmodics, Inc. Price and Consensus

 

Surmodics, Inc. Price and Consensus | Surmodics, Inc. Quote

What’s Favoring the Stocks?

In the past four years, Stryker’s revenues have witnessed a CAGR of 8.8% and reached $12 billion.

Notably, Stryker’s 2018 adjusted earnings per share are projected in the range of $7.25-$7.30. The Zacks Consensus Estimate for earnings is pegged at 7.28 per share, within the guided range.

Meanwhile, Surmodics’ revenues have witnessed a CAGR of 9.3% and reached $81 million in the past four years.

Surmodics expects a loss of 7 cents per share to earnings of 23 cents per share for fiscal 2019. The Zacks Consensus Estimate for earnings is pegged 8 cents, within the guided range.

Key Picks

A few other top-ranked stocks in the broader medical space are Veeva Systems Inc VEEV and Integer Holdings Corporation ITGR.

Veeva Systems’ long-term earnings growth rate is projected at 19.5%. The stock flaunts a Zacks Rank #1.

Integer Holdings projects earnings growth rate of 31.2% for the fourth quarter. It currently carries a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Veeva Systems Inc. (VEEV) : Free Stock Analysis Report
 
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
 
Surmodics, Inc. (SRDX) : Free Stock Analysis Report
 
Stryker Corporation (SYK) : Free Stock Analysis Report
 
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Zacks Investment Research