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Investing.com -- Moody’s Ratings upgraded Stryker Corporation (NYSE:SYK)’s senior unsecured notes to A3 from Baa1 on Wednesday, while revising the company’s outlook to stable from positive.
The upgrade reflects Moody’s expectation that Stryker will continue strong growth across its business segments, supported by new product launches and recent acquisitions that will enhance diversification. Moody’s also cited expectations for robust free cash flow that will fund research and development and acquisition strategies.
Governance risk considerations were a key driver of the rating action, with Moody’s noting its positive view of management credibility and track record in financial strategy and risk management. The rating agency highlighted Stryker’s history of maintaining strong growth while investing in R&D and pursuing external growth opportunities with disciplined financial management.
The A3 senior unsecured rating acknowledges Stryker’s significant scale as one of the world’s largest orthopedic companies, along with strong market positions in Medical (TASE:BLWV) Surgery and Neurotechnology businesses. Moody’s expects Stryker to maintain above-average organic growth rates compared to the medical device industry, benefiting from its leading position in orthopedic robotics and international expansion.
The rating is somewhat limited by Stryker’s ongoing M&A activity, including the Inari acquisition with a total enterprise value of approximately $4.8 billion. While leverage will increase following this acquisition, Moody’s expects it to decline to around 2.75x as the company implements margin expansion initiatives.
As of March 31, 2025, Stryker had cash and short-term investments of approximately $2.4 billion. Moody’s forecasts annual free cash flow in the $2.5 billion range after capital expenditures and dividends. The company has access to a $3 billion senior unsecured revolving credit facility expiring in February 2030, which serves as a backstop for its commercial paper program.
According to Moody’s, ratings could be upgraded if Stryker sustains strong organic growth while maintaining strong free cash flow and high product and geographic diversification, with debt/EBITDA below 2.75 times. Conversely, ratings could be downgraded if the company adopts a more aggressive M&A approach or faces operating setbacks, with debt/EBITDA sustained above 3.25 times.
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