Stryker Corporation SYK recently announced a definitive agreement to sell its U.S. spinal implants business to Viscogliosi Brothers, LLC, a family-owned investment firm specializing in the neuro-musculoskeletal space, to create a newly formed company called VB Spine, LLC.
This reflects a strategic move to streamline Stryker’s portfolio by divesting its U.S. spinal implants business, enabling the company to focus on higher-growth areas. Additionally, the planned sale of related international operations signals a broader effort to optimize resources and enhance profitability.
Likely Trend of SYK Stock Following the News
Following the announcement, shares of the company moved south 1.2% after the market closed on Tuesday. However, in the past six months, SYK’s shares have gained 18.6% compared with the industry’s growth of 16.6%. The S&P 500 has gained 10.8% in the same time frame.
Meanwhile, this divestiture allows Stryker to reallocate resources toward high-growth, innovative areas within its medical technology portfolio, boosting operational efficiency and profitability. By shedding a less strategic segment, the company can enhance its financial flexibility, potentially leading to higher investments in R&D and acquisitions that align with long-term growth objectives. These strategic improvements can strengthen investor confidence, making the stock more attractive in the long run and driving sustained price appreciation.
Meanwhile, SYK currently has a market capitalization of $152.5 billion. It has an earnings yield of 3.4%, much higher than the industry’s yield of 0.4%. In the last reported quarter, SYK delivered an earnings surprise of 3.24%.
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More on the SYK’s Divestiture Agreement
Per the fourth-quarter earnings release, SYK conducted its annual goodwill impairment tests and recorded a goodwill impairment charge of $273 million for the Spine reporting unit. This was primarily driven by a decrease in future product demand due to the competitive environment and an increase in the Spine reporting unit’s weighted average cost of capital. Subsequent to the annual goodwill impairment test, management committed to a plan to sell certain assets associated with the Spinal Implant business.
The sale is expected to place Stryker’s U.S. spinal implants segment in the hands of new owners, Viscogliosi Brothers. Stryker retains aiding technologies like the Q Guidance System and Mako Spine. These decisions align with the company’s strategy to concentrate on profitable, innovative solutions.
After the sale closes, VB Spine is likely to become a strategic partner to Stryker, with exclusive access to Mako Spine and Copilot for use with VB Spine’s implants in spine procedures. The deal also includes a binding offer to acquire Stryker's spinal implants business in France. Pending regulatory approvals, it anticipates the sale of the business in other international markets as well. The transaction is expected to close in the first half of 2025, with both entities operating separately until then.
SYK’s Other Recent Developments
Recently, SYK inked a definitive agreement to acquire Inari Medical, Inc. at a valuation of approximately $4.9 billion. Through the acquisition of Inari Medical, Stryker is likely to expand its portfolio and provide life-saving solutions to patients with peripheral vascular diseases.
In October 2024, the company completed the buyout of Vertos Medical, a privately held company providing a minimally invasive solution for treating chronic lower back pain caused by lumbar spinal stenosis. It did so to expand its minimally invasive pain management portfolio.
In September 2024, SYK closed the acquisition of NICO Corporation, a privately held company providing a systematic approach to minimally invasive surgery for tumor and intracerebral hemorrhage procedures. The same month, the company also acquired care.ai, a privately held company specializing in artificial intelligence (AI)-assisted virtual care workflows, smart room technology and ambient intelligence solutions.
SYK’s Zacks Rank & Stocks to Consider
SYK carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks in the broader medical space are Cardinal Health, Inc. CAH, ResMed Inc. RMD and DaVita Inc. DVA.
Cardinal Health, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.5%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 11.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health’s shares have gained 21.7% compared with the industry’s 6.1% growth in the past year.
ResMed, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.8%. RMD’s earnings surpassed estimates in each of the trailing four quarters, with the average being 6.4%.
ResMed has gained 32.4% compared with the industry’s 16.5% growth in the past year.
DaVita, sporting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 18.3%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 10.6%.
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