Danaher (DHR) vs. Stryker (SYK) - Analyzing Anticipated Q4 Earnings

With rapidly increasing healthcare demands, numerous technological breakthroughs, and advanced research and development, the medical industry is well-poised for remarkable growth and profitability. As medical companies Danaher (DHR) and Stryker (SYK) gear to report their fourth-quarter earnings tomorrow, let’s determine if these stocks are ideal buys ahead of earnings…

The medical industry is booming, driven by growing healthcare expenditure owing to the aging population and rising prevalence of chronic and rare diseases, increasing emphasis on fitness among individuals globally, the surge in advanced research and development (R&D), and rapid technological advancements.

Given the industry tailwinds, it could be wise to invest in fundamentally sound medical stocks Danaher Corporation (DHR) and Stryker Corporation (SYK) ahead of their earnings. Before delving deeper into the fundamentals of these stocks, let’s discuss trends that are shaping the medical sector’s future.

The medical industry is highly crucial for improving the quality of human life. The rising burden of chronic conditions like cardiovascular diseases, coronary heart diseases, and diabetes, the expanding aging population worldwide, and growing health awareness among individuals are primary factors contributing to the industry’s remarkable growth and expansion.

According to a report by the Heart Failure Society of America, one in four people in the U.S. are expected to develop heart failure in their lifetime. Rates are up from the prior estimate of one in five people. Nearly 8.5 million people in the U.S. over the age of 20 will have heart failure by 2030.

Demand for advanced diagnostic solutions is surging as they help improve the patient care system and reduce overall costs by supporting the early detection of critical diseases. The global clinical diagnostics market is expected to total $129.84 billion by 2032, growing at a CAGR of 6.7%. The rising integration of AI and other technologies would favor the market’s growth.

With the increasing emphasis of masses and healthcare agencies toward early diagnosis and treatment, the rise in inpatient admissions and the high number of surgical and diagnostic procedures are fueling the demand for medical devices. The U.S. medical device manufacturers market is expected to exceed $360.10 billion by 2030, expanding at a CAGR of 5.8%.

The medical device industry is characterized by a high degree of innovation owing to rapid technological advancements propelled by factors including smart devices, increased usage of AI & machine learning, enhanced popularity of biometric and wearable medical technology, enhanced focus on cybersecurity, and an ongoing shift to telehealth solutions.

The global AI in medical devices market is well-positioned for robust growth, with a projected $94.07 billion by 2028, representing an impressive CAGR of 44.4%.

Given this backdrop, fundamentally strong medical stocks DHR and SYK could be ideal buys before their upcoming earnings release.

Now, let’s take a closer look at the fundamentals of these stocks:

Danaher Corporation (DHR)

DHR designs, manufactures, and markets professional, medical, and commercial products and services globally. The company operates through Biotechnology; Life Sciences; Diagnostics; and Environmental & Applied Solutions segments. It offers bioprocess technologies, consumables, and services; mass spectrometers; pathology diagnostics products; and more.

On January 9, 2024, DHR and the Innovative Genomics Institute (IGI) launched a new collaborative center based at the University of California, Berkeley, to develop gene-editing therapies for rare and other diseases, with the aim of creating a new model for the development of a wide range of genomic medicines.

Known as the Danaher-IGI Beacon for CRISPR Cures, the center will use CRISPR-based gene editing to permanently address hundreds of devastating diseases with a unified research, development, and regulatory approach.

On December 6, 2023, DHR completed the acquisition of Abcam plc (ABCM), a world-leading supplier of life science research tools headquartered in Cambridge, the United Kingdom. Abcam is anticipated to operate as a standalone operating brand within Danaher’s Life Sciences segment, driving its strategy to help map complex diseases and accelerate the drug discovery process.

DHR reported sales of $6.87 billion for the third quarter that ended on September 29, 2023. Its net earnings came in at $1.13 billion, or $1.51 per common share, respectively. Also, the company’s operating cash flow for the quarter was $1.67 billion, and its non-GAAP free cash flow came in at $1.31 billion.

Danaher is set to report fourth-quarter 2023 earnings on January 30, 2024. Analysts expect DHR’s revenue and EPS for the quarter (ended December 2023) to decline 27.3% and 34% year-over-year to $6.08 billion and $1.89, respectively. However, the company has an impressive surprise history as it topped consensus revenue and EPS estimates in all four trailing quarters.

DHR’s stock climbed 1.1% over the past three months to close the last trading session at $233.

DHR’s POWR Ratings reflect its bright prospects. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has a B grade for Stability, Quality, and Sentiment. DHR is ranked #9 of 47 stocks in the Medical - Diagnostics/Research industry.

In addition to the POWR Ratings we’ve stated above, one can access DHR’s ratings for Growth, Value, and Momentum here.

Stryker Corporation (SYK)

SYK, a medical technology company, provides implants for use in hip and knee joint replacements, spinal implant products, surgical equipment and surgical navigation systems, emergency medical equipment, reprocessed medical devices, and neurotechnology products. It operates in MedSurg and Neurotechnology; and Orthopaedics and Spine segments.

On January 17, SYK announced the addition of an intermediate nail, the RC Lag Screw, and an anti-rotation clip with sleeve components, expanding its Gamma4 Hip Fracture Nailing System. Since its launch in August 2022, the Gamma4 System has been used in more than 19,000 cases across 850 facilities, solidifying its position as a leading choice in orthopaedic procedures.

“Stryker remains unwavering in our commitment to providing cutting-edge orthopaedic solutions to meet the needs of our customers. While Gamma4 has already made a significant impact, the new line extension expands our nailing portfolio and provides surgeons with options that are designed to streamline operative flow and improve procedural efficiency,” said Eric Tamweber, Vice President and General Manager, SYK’s Trauma business.

On December 18, SYK announced that it had executed a binding offer to Menix to acquire SERF SAS, a France-based joint replacement company. This acquisition is expected to complement Stryker’s existing presence in France and across Europe and its global joint replacement portfolio, enabling the company to service a wider range of patients.

The proposed acquisition is anticipated to close during the first quarter of this year, subject to customary closing conditions, including regulatory approvals.

For the third quarter that ended on September 30, 2023, SYK’s net sales increased 9.6% year-over-year to $4.91 billion. Its adjusted gross profit grew 13.4% from the year-ago value to $3.18 billion. Its adjusted operating income was $1.15 billion, an increase of 14.8% from the previous year’s period.

Furthermore, the company’s net earnings and adjusted EPS amounted to $944 million and $2.46, up 16.5% and 16% year-over-year, respectively.

SYK will report financial results for the fourth quarter and full year 2023 on January 30, 2024, after market close. Street expects the company’s revenue and EPS for the quarter (ended December 2023) to increase 7.7% and 8.9% year-over-year to $5.60 billion and $3.27, respectively. Also, Stryker surpassed consensus revenue and EPS estimates in all four trailing quarters.

For the full year 2023, analysts expect SYK’s revenue to grow 9.9% and 11.5% year-over-year to $20.28 billion and $10.41, respectively. In addition, the company’s revenue and EPS for the fiscal year 2024 are estimated to increase 7.6% and 10.9% from the previous year to $21.81 billion and $11.54, respectively.

Shares of SYK have gained 7.3% over the past six months and 23.4% over the past year to close the last trading session at $311.36.

SYK’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has a grade of B for Growth and Stability. SYK is ranked #38 of 143 stocks in the Medical - Devices & Equipment industry.

To access SYK’s POWR ratings for Value, Momentum, Quality, and Sentiment, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

DHR shares were unchanged in premarket trading Monday. Year-to-date, DHR has gained 0.72%, versus a 2.55% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.


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