Monday, Stryker Corporation (NYSE:SYK) stock remained under the spotlight as Evercore ISI reiterated its Outperform rating and $400.00 price target. The firm’s analysis highlighted Stryker’s historical preference for growth-oriented acquisitions, which aligns with their expectations of high revenue growth for Inari Medical (TASE:PMCN) (NARI), despite not covering NARI or Penumbra (NYSE:PEN) directly.
According to InvestingPro data, NARI has demonstrated strong revenue growth of 22.4% over the last twelve months, with the stock currently trading near its 52-week high of $65.94.
The report noted that the potential acquisition of NARI could be slightly accretive to Stryker’s revenue growth by approximately 25 basis points. Additionally, it is anticipated that NARI would contribute positively to Stryker’s gross margins by around 65 basis points, although it could dilute operating margins by 50 basis points.
This is based on the assumption of roughly 12% of revenue in cost synergies to be realized over three years. NARI’s impressive gross profit margin of 86.8% supports this outlook, as highlighted in InvestingPro’s financial metrics.
Evercore ISI commented on the implications for Stryker’s financial metrics following the deal, suggesting that the company’s target of triple-digit operating margin expansion (OMx) for fiscal year 2025 would no longer be achievable. Instead, an expansion of 50-75 basis points is expected.
Furthermore, the acquisition is projected to be about 2% dilutive to Stryker’s earnings per share (EPS) relative to Evercore ISI’s previous estimates, which had included an assumption of approximately $2.5 billion in share repurchases over the fiscal years 2025 and 2026. Without the share repurchase assumption, the gross dilution could be around 3%.
Looking ahead, if NARI maintains a mid-teens compound annual growth rate (CAGR) in revenue and achieves an operating margin of roughly 26% by fiscal year 2030, the return on invested capital (ROIC) from the deal is estimated to exceed 6%. However, this figure falls below the weighted average cost of capital (WACC).
Evercore ISI expressed interest in Stryker’s forthcoming commentary regarding return on invested capital hurdle metrics. With analyst price targets ranging from $50 to $86, and an overall FAIR financial health score from InvestingPro, investors can access comprehensive analysis and 8 additional ProTips about NARI’s potential through the platform’s detailed research reports.
In other recent news, Stryker Corporation and Inari Medical have announced a definitive agreement for Stryker’s acquisition of Inari Medical for $80 per share. This strategic acquisition, valued at approximately $4.9 billion, is set to enhance Stryker’s portfolio by incorporating Inari’s strong position in the rapidly expanding venous thromboembolism (VTE) market.
Inari Medical recently reported a record Q3 revenue of $153.4 million, marking a 21% year-over-year increase, and raised its full-year revenue outlook to between $601.5 million and $604.5 million. Analyst firms Oppenheimer and Canaccord Genuity have given Inari an Outperform and Buy rating respectively, with price targets set at $75.00 and $74.00.
Stifel analysts maintained a Hold rating on Inari Medical with a price target of $50.00. Inari’s ClotTriever Thrombectomy System for deep vein thrombosis has also received national reimbursement approval in Japan, further solidifying its market position. These are some of the latest developments for Inari Medical and Stryker.
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