This has been a pretty bad year to be a good medical technology company. Johnson & Johnson
I'll talk about some of the longer-term fears in a moment, but let's look at the quarter report first. Once again, Stryker managed to get the job done. Revenue rose 9% and the company reported that this was purely from volume and mix -- price momentum was essentially nil. Margins improved yet again and the company saw operating income rise more than 16% and net income more than 20%.
As has been the case before in recent times, the medical equipment business did most of the heavy lifting. Orthopedic implant sales were up a bit less than 7% as flat performance in hips continues to weigh down the double-digit growth in the knee, trauma, and spine businesses. With the MedSurg business, though, revenue rose over 14% as instrumentation, endoscopy, and medical segments all posted double-digit revenue growth.
So, what about that future for Stryker? The newish Triathlon system continues to boost the knee franchise, and the company is about to start rolling out a hip resurfacing system in international markets that could spark that segment a little bit. There's also the big unknown that is OP-1 -- a biotech product that has been long in coming.
On the pricing front, though, there could still be danger. I have no idea what the Justice Department investigation will uncover, but I do know that greater pricing transparency could be a threat. Simply put, one hospital may pay much more (or less) for a Stryker hip or a Zimmer
Stryker will eventually get through all of this, but I don't claim to know when that will be. In the meantime, I'm still a big fan of Stryker, but I have to point out that Zimmer shares seem like the better relative bargain today -- even if you project less growth for them than for Stryker.
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Fool contributor Stephen Simpson owns shares of Johnson & Johnson, but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares). The Fool has an ironclad disclosure policy.