I noticed this morning that Stryker, SYK,  issued an 8-K report on
Dec. 6.  8-K reports are issued when a company knows of an event that
may have a material impact on their earnings.  In this case,  one of
the items noted was an upcoming sale of a division.  Stryker reported
that the loss on this sale would result in a $.19-$.20 decrease in
their 4th quarter earnings.  Since the projected earnings were $.89,
this would be a pretty significant hit.

However,  they indicated that their guidance for "adjusted" diluted
net earnings for the year was still the same.  $3.27-$3.30.    This is
the only quarter left.  The only way to achieve this guidance would be
to have the earnings come in at $.89.   Of course the qualifier
"adjusted" leaves some room for them to play with which numbers they
include when reporting the "adjusted" Earnings per Share.

When a company discontinues an operation,  it must extract the income
and expenses associated with that operation from it's financial
results.  What will be important going forward is to watch the impact
of removing this divisions' operations on sales growth and margins.

Hopefully,  Stryker will provide restated historical financial
statements which exclude the operations of this division.  That will
allow you to make comparisons and, if needed, revise sales growth and
net margin projections based on the new operating scenario.

Stryker has been facing some headwinds recently anyway.   It's P/E has
contracted quite a bit.   It looks like "unadjusted" diluted earnings
per share might come in lower than anticipated.   This would bump up
current P/E a bit.  If people aren't comfortable with the level it
moves up to,  it might further constrain upward movement of the stock
price.

Hopefully,  this sale is a good business decision and will allow
Stryker to eventually return to the sales growth, net margin and P/E
levels it has been able to achieve historically.  Anyone looking at it
as a long term investment needs to think in those terms.  It's just
that sometimes we wonder why prices of stocks that are recommended as
long term holdings "don't go anywhere" for a while.  This is an
example of one of the types of events that might cause that.

--
Laurie Frederiksen
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