Executive Summary
The New Year started off well in the US medical devices industry and shows no signs of slowing down in 2008. The robust demand for medical equipment and the increasingly ageing population helped the shares of several medical devices makers outperform the market in the second half of 2007. We maintain the belief that, as a whole, the medical device industry is highly profitable with high barriers to entry. In addition, during periods of economic uncertainty, medical equipment has seen continued gains.
We are evaluating two companies within the Medical Equipment Industry: Stryker Corp. (NYSE:SYK) and Medtronic Inc. (NYSE:MDT). Our main goal is to analyze which company might make a better investment.
Stryker Corp (NYSE: SYK)
We are recommending a buy at a price target of: $78.90
Market data as of: 07/18/2007
STOCK PRICE: $64.52
ANNUAL DIVIDEND: $0.33
MARKET CAP: $26.58B
PRICE TO EARININGS: $25.34
(TRAILING 12MOS)
PRICE TO EARNINGS: $25.69
(FORWARD 12MOS)
FULL YEAR ENDED 12/31/
2004 2005 2006 2007
Total Net Sales $4,262,300 $4,608,900 $5,147,200 $6,000,500
Sales Growth 17.57% 8.13% 11.68% 16.58%
Operating Income $720,400 $998,800 $1,074,300 $1,307,300
Operating Margin 16.90% 21.67% 20.87% 21.79%
Net Income $465,700 $675,200 $777,700 $1,017,400
Net Margin 10.93% 14.65% 15.11% 16.96%
Earnings Growth 2.69% 44.99% 15.18% 30.82%
Medtronic, inc. (NYSE: MDT)
We are recommending a buy at a price target of: $ 56.50
Market data as of: 07/18/2007
STOCK PRICE: $53.43
ANNUAL DIVIDEND: $0.19
MARKET CAP: $60.12B
PRICE TO EARININGS: $27.37
(TRAILING 12MOS)
PRICE TO EARNINGS: $19.73
(FORWARD 12MOS)
FULL YEAR ENDED 04/25/
2004 2005 2006 2007
Total Net Sales $10,054,600 $11,292,000 $12,299,000 $13,515,000
Sales Growth 10.65% 12.31% 8.92% 9.89%
Operating Income $2,788,900 $3,240,600 $3,698,989 $3,212,000
Operating Margin 27.74% 28.70% 30.08% 23.77%
Net Income $1,803,900 $2,546,700 $2,802,000 $2,231,000
Net Margin 17.94% 22.55% 22.78 % 16.5%
Earnings Growth -7.93% 41.18% 10.02% -20.38%
INVESTMENT THESIS
Stryker Corp is more attractive than Medtronic over the next 12-18 months. Stryker reported that its net income rose by 31% to US$1.02 billion, in 2007 compared with US$777.7 million in 2006. The increase in earnings was due to the weaker dollar, while domestic demand for its orthopedic implants and MedSurg equipment helped drive up revenue. The rise was also due to strong international sales of orthopedic implants and medical equipment.
The Company’s outlook for 2008 continues to be optimistic regarding underlying growth rates in orthopedic procedures and sales growth rates in the Company’s broadly based range of products in orthopedic and other medical specialties, despite the potential for increased pricing pressure in certain markets. The Company projects that diluted net earnings per share for 2008 will approximate $2.88, representing a 22% increase over diluted net earnings per share from continuing operations of $2.37 for the year ended December 31, 2007.
The financial forecast for 2008 includes a constant currency net sales increase in the range of 11% to 13% as a result of growth in shipments of orthopedic implants and MedSurg Equipment. If foreign currency exchange rates hold near December 31, 2007 levels, the Company anticipates a favorable impact on net sales of approximately 2.5% to 3% in the first quarter of 2008 and a favorable impact on net sales of approximately 1% to 1.
Revenues of $10,161 million in the fiscal year ended December 2014 was seen by the organization, an increase of 5.3% over 2013.The company 's operating profit was $419 million in fiscal 2014, as compared to an operating loss of $22 million in 2013. Its net profit was $402 million in fiscal 2014, an increase of 34% over 2013 (Sutter Health, 2016).
In addition to this business plan, we must also address the financial issues plaguing this organization. To illustrate some of these issues lets look at some of the trends here at OCB and within our Industry: For example, OCB’s clinic operations profitability in 1990 was 60%, and now in 1996 our profitability is only 37%, which is down 23 percentage points! We can blame some of this on rising costs of overhead, consumables, etc, however this is happening as the industry as a whole is growing 5% annually, and as our customer base, largely senior citizens, population is growing at almost 1% as year. We should be capitalizing on these industry trends, however, as you all know, not all the trends work in our favor. For example, our lifeblood, the Insurance company’s managed care organizations, and government healthcare reimbursement programs shows a downward trend of allowable payments for our services (DRGs) For example in 1995 the DRG price of ...
First, let us analyze General Practice Affiliates’ current financial position. The income and expenses report shows a net revenue of $230,250. The net revenue is obtained after expenses, including taxes, of the company have been subtracted from revenue (Paterson, 2014, p. 124). The balance sheet shows a $306,180 in retained earnings. Retained earnings represent stakeholders’ equity (Paterson, 2014, p. 128). Retained earnings are usually invested back in the form of inventory or debt payments (Albrecht, Stice, Stice , & Swain, 2008). General Practice Affiliates’ cash flow analysis shows that the practice invests in new equipment. However, General Practice Affiliates mainly used cash during 2012. The main source of cash from operations came from depreciation expense, which is not a reliable source of funding (Paterson, 2014, p. 130). Accounts receivable increased by $50,000, while accounts payable only increased by $10,000. In addition, cash flow analysis shows a balance sheet data that is affected by future transactions (Paterson, 2014, p. 128). General Practice Affiliates choose to stretch the time to pay suppliers instead of paying its bills. ...
Payers are consolidating, providers are merging, and both are vertically integrating, creating a new breed of hybrid clinical and risk-bearing customers for Medtronic. Their struggle to effectively manage outcomes and costs exposes a need that Medtronic can address.
...MPONI and REMICADE, infectious disease products, such as INCIVO and PREZISTA, neuroscience products, oncology products and other pharmaceuticals. The Medical Devices and Diagnostics segment consists mostly of franchises such as Orthopaedics franchise, Surgical Care, Vision Care, Diabetes Care, Specialty Surgery, Diagnostics and other franchises. The rich portfolio J&J has of products, franchises and companies is one of the reasons why the company is one of the market leaders.
“US Markets for Heart Valves.” SAGE Sourcebook of Modern Biomedical Devices: Business Environments, 2007. 21 April 2011.
MCI's capital requirements for the next 3 years are x,y and z. (see exhibit A). These values are based on a number of different assumptions. (See exhibit B). The forecast is not without a level of uncertainty. Specifically there are regulatory decisions where the outcome is not clear at this time. This could impact profit margin plus or minus seven percentage points. (See exhibit c)
First of all we need to understand the type of technology this device represents. Is this a sustaining innovation? Or is this a completely new disruptive product? After fully understanding this aspect we can make better decisions regarding the future of the firm and its product. This device offers many benefits that current products do not. As explained earlier, this device is extremely portable, offering emergency rooms the flexibility and convenience they seek to provide patients with the best treatment possible. Likewise, this product will come in at a price point much lower than current echocardiographies, further separ...
Gershon, H., & Pattakos, A., (2004). Creating market opportunities: Innovation is key. Journal of Healthcare Management, 49(1), 9-11.
Presenting team analysis The presenting team started out by giving a background about the industry and the companies. The main issue and financial terms were explained. However, we feel that some of the assumptions, such as Merck's flexibility to back out from building the plant in case of failure, were not clearly mentioned. They failed to explain why Davanrik's market risk was lower than its stand-alone risk. Discounted cash flow method, which is the traditional financial tool for evaluating capital allocation, was rejected without explanation.
The purpose of this report is to analyze Target Corporation’s financial statements, determine the future growth potential of the company, and make a recommendation for or against the acquisition of the company.
While analyzing the data for The Body Shop International case, I noticed some trends and have compiled my assumptions for the next three years. I have compiled pro-forma statements for the fiscal years 2002, 2003 & 2004. These figures are based on the percentage of sales method for pro-forma financial modeling. Simply put, I used the sales figures from the past three years 1999, 2000 & 2001 and applied a growth rate of 13% increase to sales. Below are some additional assumptions that I have created to illustrate how the firm can become profitable while increasing market share and maintaining stockholder interest within the firm over the next three years.
price, quality, convenience, and superior products or services); however, competition can also be based on new technology and innovation. A key role of competition in health care is the potential to provide a mechanism for reducing health care costs. Competition generally eliminates inefficiencies that would otherwise yield high production costs, which are ultimately transferred to patients via high health service and delivery costs” (http://www.ncbi.nlm.nih.gov). “Competition in health care markets benefits consumers because it helps contain costs, improve quality, and encourage innovation” (https://www.ftc.gov). Competition compels companies to deliver increasing value to customers. The fundamental driver of this continuous quality improvement and cost reduction is innovation. Without incentives to sustain innovation in health care, short-term cost savings will soon be overwhelmed by the desire to widen access, the growing health needs of an aging population, and the unwillingness of Americans to settle for anything less than the best treatments available. The United States can achieve universal access and lower costs without sacrificing quality, but only by allowing competition to work at all levels of the health care system. Prices remain high even when there is excess capacity. Technologies remain expensive even when they are widely used. Hospitals and physicians remain in business even when they charge
The United States health care system is one of the most expensive systems in the world yet it is known as being unorganized and chaotic in comparison to other countries (Barton, 2010). This factor is attributed to numerous characteristics that define what the U.S. system is comprised of. Two of the major indications are imperfect market conditions and the demand for new technology (Barton, 2010). The health care system has been described as a free market in
...d about the economic nature of new technologies, Dr. Slez emphasized that “costs almost always increase with new equipment”. When deciding whether or not to adopt a new technology, Dr. Slez cited cost of implementation, industry standard, and efficacy relevant to the current market as his primary considerations. “If a treatment costs more but is no more effective, we won’t adopt it” he continued. Technology, as with all other aspects of the firm, must be consistent with that firm’s goals; excellent care at an affordable cost.