Medical technology company Stryker Corp. (NYSE:SYK) said Wednesday that its Chairman and Chief Executive Stephen MacMillan has resigned with immediate effect for family reasons.
Curt Hartman, Vice President and Chief Financial Officer, has been named Interim Chief Executive Officer. The company, which has begun a search for a permanent successor to MacMillan, will consider both internal and external candidates and hopes to name a new CEO by the end of 2012..
It has been said that MacMillan has been going through a divorce over the past year and resigned as it became harder to focus 100 percent of his attention on the company.
But, the sudden resignation of the CEO would leave investors with many questions, especially over the timing of the resignation.
"SYK management noted that there had already been a board of directors meeting scheduled and that Mr. MacMillan felt this was the best venue to officially tender his resignation. While this makes some sense, we still do not understand why there was not a smoother transition period," RBC Capital Markets analyst Glenn Novarro wrote in a note to clients.
In addition, there will be potential disruption in operations as MacMillan was a very "hands on" CEO. However, the company has a strong bench of executives and should be able to manage through the CEO transition.
The company has reiterated its current 2012 EPS guidance of $3.87 a share on a GAAP basis and $4.09 a share on adjusted basis. The analyst said he doesn't view MacMillan's resignation as a signal of any change to the company's core business outlook.
Novarro added he would use weakness to add to positions to Stryker shares, which lost 75 cents to $54 in the extended trading session on Wednesday. The stock continued its downtrend on Thursday and is currently down 71 cents, or $1.29 percent, to $54.04.
Our Take: Shareholders are overreacting to the sudden resignation and the company has a strong bench strength to manage the operations without MacMillan. The company's fundamentals also looks good with 2011 sales increasing 13.5 percent to $8.31 billion, profit rising 6 percent to $1.27 billion and the company forecasting double-digit earnings growth in 2012. Investors should use this weakness as a buying opportunity.