Stryker stock target cut to $390 by Evercore ISI

On Friday, Evercore ISI adjusted its price target for Stryker (NYSE:SYK), a prominent player in the Healthcare Equipment & Supplies industry with a market capitalization of $142.75 billion, lowering it from $400.00 to $390.00, while maintaining an Outperform rating on the stock. According to InvestingPro analysis, Stryker has demonstrated strong financial health with a "GREAT" overall score, supported by its consistent dividend payments for 35 consecutive years. The adjustment follows Stryker’s first-quarter earnings report, which showed a 10.1% organic revenue growth, exceeding Street estimates by approximately 310 basis points, with total revenues of around $5.9 billion. This performance aligns with the company’s impressive last twelve months revenue growth of 10.23% and robust gross profit margin of 64.37%. The MedSurg division’s organic growth of 10.7% surpassed Street estimates by 3.9%, and the Orthopedics division’s 9.3% organic growth exceeded estimates by 1.9%.

The company’s gross margin performance was robust and contributed to a beat in operating margin expectations. Earnings per share (EPS) grew by 14% and outperformed estimates by roughly 4.5%, primarily driven by revenue growth and operating margin expansion.

Looking ahead to fiscal year 2025, Stryker raised its organic growth forecast by 50 basis points to a range of 8.5% to 9.5%, essentially reflecting the strong performance in the first quarter. However, the company simultaneously lowered its EPS guidance by 25 cents to a new range of $13.20 to $13.45, compared to the previous forecast of $13.45 to $13.70. The updated guidance takes into account total incremental EPS headwinds of approximately 79 cents. This includes a consistent 25 cents from the anticipated closure of the Neurovascular Associates, Inc. (NARI) deal and a new 44-cent impact from an estimated $200 million in tariff headwinds.

These headwinds are partially offset by a favorable foreign exchange impact improvement of 8 cents compared to the prior guidance, the carry-forward of approximately 13 cents from first-quarter outperformance, and about 24 cents from increased operational expense management. Despite these incremental margin headwinds, which total roughly 100 basis points, including 20 basis points from the NARI deal and 80 basis points from tariffs, Stryker reiterated its overall operating margin expansion of approximately 100 basis points.

The company also updated its forecast for interest and other expenses, which are now expected to be around $430 million in fiscal year 2025 due to the closure of the NARI deal. Additionally, Stryker reiterated its tax rate guidance of 15-16%. While trading at a relatively high P/E ratio of 47.71, InvestingPro analysis reveals that Stryker’s cash flows can sufficiently cover interest payments, and the company operates with a moderate level of debt. For deeper insights into Stryker’s valuation and financial health, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which includes detailed analysis of over 1,400 US stocks.

In other recent news, Stryker Corporation reported impressive financial results for the first quarter of 2025. The company exceeded analysts’ expectations with an adjusted earnings per share (EPS) of $2.84, surpassing the forecasted $2.71. Stryker’s revenues reached $5.9 billion, outpacing the anticipated $5.68 billion. Despite these strong results, Stryker’s stock experienced a slight decline in after-hours trading. The company also completed the acquisition of Inari Medical (TASE:BLWV), which is expected to bolster its vascular division. Additionally, Stryker sold its U.S. Spinal Implants business, aligning with its strategic focus. Analysts from firms like JPMorgan and Wells Fargo (NYSE:WFC) noted the company’s strong performance, with some expressing optimism about Stryker’s ongoing momentum in the orthopedic and capital equipment markets. Stryker has maintained its guidance for full-year organic sales growth and adjusted EPS, signaling confidence in its future performance.

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