Stryker Corporation (SYK), together with its subsidiaries, operates as a medical technology company worldwide. The company operates in two segments: orthopedic implants and med-surg equipment. The equipment segment offers surgical equipment; surgical navigation systems; endoscopic, communications, and digital imaging systems; and patient handling and emergency medical equipment.
Stryker Corporation sells its products through local dealers and direct sales force to doctors, hospitals and other health care facilities.
THE RECESSION FACTOR
The global economic downturn has had mixed effects on the medical technology industry. The biggest disparity lies between companies that produce products for elective and nonelective procedures.
Nonelective treatments remained fairly constant while patients considering elective procedures were less likely to visit their doctors. This divide was especially seen in orthopedic medical technology.
Knee and hip replacements were down because people seemed willing to put off procedures because of high surgery costs. Orthopedic companies that released newer high-cost products saw more success despite the decrease in patients.
THE LEGISLATION FACTOR
Like the economic downturn, the health reform bill is also having mixed effects on the medical technology industry.
The health reform bill will cover more people who, in turn, will need more access to medical devices and technology. However, a greater emphasis on efficiency could offset the increase in patients.
The reform bill is aimed at reducing redundant visits to imaging, diagnostic and screening machines. A 2.3 percent excise tax on medical devices set to begin in 2013 is also included in the reform bill. The tax will be on devices that ship domestically in nonretail settings.
Early estimates show that that this could cost the industry up to $2.3 billion in the first year.
TECHNICAL VIEW
Besides having to compete with the will of the government on almost every level, SYK is technically fading.
The stock recently missed on its earnings and on July 21 had a gap down in price on big volume. The stock is now in a bear flag on the daily chart and has breached some of that support.
The underlying technicals are weak and a break of this bear flag accompanied by volume could lead this down. My target is $42 to $43.