Stryker Corporation SYK delivered second-quarter 2019 adjusted earnings per share (EPS) of $1.98, beating the Zacks Consensus Estimate by 2.6%. The bottom line improved 12.5% year over year and exceeded the high end of the company’s guidance range.
The Michigan-based medical device company reported revenues of $3.65 billion, which surpassed the Zacks Consensus Estimate by 1.4%. Revenues increased 9.9% on a year-over-year basis and 11.5% at constant currency (cc).
The company delivered organic growth of more than 8.5% in the quarter under review, which helped it sustain the multi-year momentum across its businesses and regions.
Stryker Corporation Price, Consensus and EPS Surprise
Stryker Corporation price-consensus-eps-surprise-chart | Stryker Corporation Quote
Revenues by Geography
Revenues in United States came in at $2.69 billion, up 13% year over year. International sales were up 1.9% to $955 million.
U.S. organic sales grew 9.3% and international organic sales came in at 6.5%. While solid performance across Orthopaedics, MedSurg and Neurotechnology segments drove growth in the United States, robust gains in emerging markets, Europe and Australia were responsible for the higher international organic sales.
Orthopaedic: In the quarter under review, revenues in the segment totaled $1.27 billion, up 3.7% year over year. The segment’s revenues improved 5.6% at cc. The performance can be attributed to better results at the Knee and Hips sub segments. The company continues to witness solid demand for Mako TKA (Total Knee Arthoplasty) platform or cementless knee and other 3D printed products and shoulder implants.
MedSurg: This segment reported sales of $1.62 billion, up 11.1% year over year. Sales at the segment increased 12.5% at cc. Per management, the segment grew 11.5% organically in the reported quarter, led by strong Endoscopy, Instruments and Medical performances.
Neurotechnology & Spine: Sales in the segment grossed $760 million, up 18.9% year over year and 20.8% at cc. Organically, the segment witnessed growth of 7.4%. Per management, the upside was driven by sustained solid demand for Neurotech products, partially offset by somewhat lower spine organic growth owing to the company’s focus on integrating its legacy Spine business with K2M.
In the second quarter, gross profit totaled $2.38 billion, 8.7% from the year-ago quarter. Adjusted gross margin was 65.8%, down 30 bps.
Operating income totaled $613 million, down 8.8% from the prior-year quarter. Adjusted operating margin 25.9%, up 20 bps.
Cash and cash equivalents came in at $1.75 billion, plunging 51.5% from the 2018-end level.
Cash flow from operating activities as of June 30, 2019, came in at $827 million, down 12.6% from the year-ago period.
Based on the second-quarter performance the company now expects the following:
Stryker expects 2019 organic net sales growth in the range of 7.5-8%.
On a full-year basis, adjusted EPS is expected in the band of $8.15 to $8.25. The Zacks Consensus Estimate is pegged at $8.15, within the company’s guided range.
For the third quarter of 2019, adjusted EPS is anticipated within $1.87 and $1.92. The Zacks Consensus Estimate stands at $1.90, within the company’s projected range.
Stryker exited the second quarter of 2019 on a solid note, with earnings and revenues surpassing the consensus mark. The company continues to gain from its core MedSurg unit that put up a strong show in the reported quarter. Additionally, strength in flagship Mako platform continues to favor the company. Moreover, sustained solid demand for Neurotech products drove the core Neurotechnology & Spine unit in the quarter under review. Solid international growth also buoys optimism. Expansion in operating margin is a positive while a strong outlook for 2019 is indicative of bright prospects.
Meanwhile, contraction in gross margin raises concern. Pricing pressure also continues to plague Stryker. Stiff competition in the MedTech space is likely to mar prospects.
Stryker currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader medical space are Hologic Inc. HOLX, DENTSPLY SIRONA Inc. XRAY and Teleflex Inc. TFX.
Hologic is scheduled to release second-quarter 2019 results on Jul 31. The Zacks Consensus Estimate for the to-be-reported quarter’s adjusted EPS is pegged at 61 cents and the same for revenues stands at $834.6 million. The stock carries a Zacks Rank #2 (Buy).
DENTSPLY SIRONA is scheduled to release second-quarter 2019 results on Aug 2. The Zacks Consensus Estimate for second-quarter adjusted EPS and revenues is 62 cents and $1.03 billion, respectively. The stock sports a Zacks Rank #1.
Teleflex is expected to release second-quarter 2019 results on Aug 1. The Zacks Consensus Estimate for adjusted EPS for the to-be-reported quarter is $2.59 and the same for revenues is pegged at $636.7 million. The stock has a Zacks Rank of 2.
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