Medtronic vs Stryker

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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
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Most leading US medical devices manufacturers sought to introduce new products, secure market share and drive long-term growth to remain competitive. Despite economic jitters in the US, the industry remained healthy and showed little sign of slowing down significantly in 2008. It serves more than 300 million people and should continue to be profitable. As patients continue to make their quality of life an important healthcare priority and are willing to invest in treatments, medical devices manufacturers and providers should experience growth. Medical device companies continued to devote time and money to determine national regulatory requirements, conduct additional overseas clinical trials and equip themselves new medical technologies. The demand for medical devices was driven by growing expenditure on healthcare around the world, including building hospitals and clinics, focusing attention on the health of citizens and adopting better technologies. One of the ongoing issues, however, was the safety and quality of devices originating from overseas, particularly China.

In 2007, the US medical devices industry saw healthy growth, thanks to strong sales of medical devices. As a result, the shares of most leading medical devices companies rose in the second half of 2007.

Stock Performances of Leading US Medical Equipment Companies

Companies % Increase in Share Prices(Jul – Dec 2007)
Stryker Corp 17.7%
Becton Dickinson 11.4%
Baxter International

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