Stryker Corp., ) Stryker

PAIR 6: BALL AND STRYKER Between July 9 and July 23, 2002, Ball Corp.’s stock dropped from $43.69 to $33.48-a loss of 24% that left the company with a stockmarket value of $1.9 billion. Over the same two weeks, Stryker Corp.’s shares fell from $49.55 to $45.60, an 8% drop that left Strkyer valued at a total of $9 billion.

What had made these two companies worth so much less in so short a time? Stryker, which manufactures orthopedic implants and surgical equipment, issued only one press release during those two weeks. On July 16, Stryker announced that its sales grew 15% to $734 million in the second quarter, while earnings jumped 31% to $86 million. The stock rose 7% the next day, then rolled right back downhill.

Ball, the original maker of the famous “Ball Jars” used for canning fruits and vegetables, now makes metal and plastic packaging for industrial customers. Ball issued no press releases at all during those two weeks. On July 25, however, Ball reported that it had earned $ million on sales of $1 billion in the second quarter-a 61% rise in net income over the same period one year earlier. That brought its earnings over the trailing four quarters to $152 million, so the stock was trading at just 12.5 times Ball’s earnings. And, with a article value of $1.1 billion, you could buy the stock for 1.7 times what the company’s tangible assets were worth. (Ball did, however, have just over $ million in debt.) Stryker was in a different league. Over the last four quarters, the company had generated $301 million in net income. Stryker’s article value was $570 million. So the company was trading at fat multiples of 30 times its earnings over the past 12 months and nearly 16 times its article value. On the other hand, from 1992 through the end of 2001, Stryker’s earnings had risen 18.6% annually; its dividend had grown 482 Commentary on Chapter 18by nearly 21% per year. And in 2001, Stryker had spent $142 million on research and development to lay the groundwork for future growth.