Amid a deteriorating macroeconomic backdrop, orthopedic industry stocks have shown resiliency relative to the broader public markets. This enables management teams to breathe a sigh of relief, driven in part by expectations for a long-awaited pickup in procedure volumes, as they and investors have watched valuations tumble over recent years due to COVID-19 headwinds, supply-chain backlogs, and other industry forces. By Oded Ben-Joseph, PhD, Thomas Busby, and Derrick Holmes, Outcome Capital.
While equity trends serve as a refreshing signal for the orthopedic industry’s future prospects, day-to-day operating challenges remain unrelenting. Most significant is staffing shortages in hospitals, which surveys indicate as currently the largest impediment to procedural catchup. In a Canaccord Genuity Capital Markets October 2022 survey of 47 orthopedic surgeons, 47% of respondents noted their facilities are performing surgeries at 80% capacity or less. Some 30% of respondents cited staffing as the number-one bottleneck influencing market growth, up from 23% in June. Additional industry dynamics, such as supply-chain constraints, continue to weight on both stocks and market demand, as Stryker Chairman and CEO Kevin Lobo told analysts on the company’s third-quarter earnings call on October 31, 2022.