For the quarter, ICU Medical, Incorporated (NASDAQ:ICUI) earned $0.48 per share, or $7.4 million, a 19.5% year-over-year decline. Revenue rose 1.8% to $78.7 million. The company also lowered its outlook for the rest of the year. Unlike Stryker, however, ICU’s bottom line wasn’t marred by recalls, although it pulled a 16-year old catheter connector off the market earlier this year. Rather, ICU attributed its decline to “current business trends in certain market segments.”
In particular, a 19.1% year-over-year sales decline in critical care products, which account for 16% of ICU’s total sales, offset a 31.7% gain in oncology products, which comprised 12% of its top line. ICU Medical’s smaller size and less diversified product portfolio also appeared to work against it last quarter.
Zimmer Holdings, Inc. (NYSE:ZMH) competes directly with Stryker in several business segments. It produces orthopaedic reconstructive, spinal implants, trauma devices, dental implants, and other surgical products. Zimmer notably acquired Knee Creations in May to compete against Stryker’s knee implant products.
Zimmer Holdings, Inc. (NYSE:ZMH) reported 4.3% earnings growth last quarter as revenue declined 0.2%. Zimmer Holdings was also hit by several recalls over the past year for its hip implants and spinal surgery instruments, which prompted a wave of lawsuits.
Zimmer is scheduled to release its second quarter earnings on July 25, and its results should offer up some interesting comparisons to Stryker, since they share similar business models and face the same problems.
Is bigger better?
For a bigger, more diversified healthcare portfolio, investors can also consider General Electric Company (NYSE:GE). Although most investors commonly associate GE with industrial equipment, aerospace technology and household products, GE actually has one of the largest and fastest growing healthcare divisions in the world, which accounts for 12.8% of the company’s top line.
GE Healthcare manufactures a wide variety of products, including diagnostic imaging products, surgical tools, clinical care products (including baby incubators and respirators), and a biotech arm. Last quarter, GE’s Healthcare division’s profit rose 4.6% year-over-year, but its revenue dipped 0.2% to $4.49 billion. Total product orders, however, climbed 9% from the previous year.
Therefore, GE is a sound choice for investors who want some exposure to the healthcare industry without investing themselves too heavily in a single business which is vulnerable to costly recalls or sluggish trends in certain segments. However, General Electric Company (NYSE:GE) is unlikely to experience the rapid growth that Stryker has experienced over the past year due to its larger size.
The Foolish Bottom Line
All four companies mentioned in this article have outperformed the S&P 500 over the past year.
This means that despite facing recalls and a slowdown across the industry, investors are still optimistic that these medical device businesses will continue growing. A brief glance at current valuations, however, reveals that Stryker might be getting a bit ahead of itself.
