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Stryker (SYK) Q3 Earnings Meet Estimates, Revenues Beat

Zacks Equity Research

Stryker Corporation SYK reported third-quarter 2019 adjusted earnings per share (EPS) of $1.91, which came in line with the Zacks Consensus Estimate. However, the bottom line improved 13% year over year and was at the high end of the company’s guidance range.

The Michigan-based medical device company reported revenues of $3.59 billion, which outpaced the Zacks Consensus Estimate by 0.2%. Revenues increased 10.6% on a year-over-year basis and 11.5% at constant currency (cc).

The company delivered organic growth of more than 8.6% in the quarter under review, which helped it sustain the multi-year momentum across businesses and regions.

Revenues by Geography

Revenues in United States came in at $2.64 billion, up 11.1% year over year. International sales were up 9.5% to $943 million.

U.S. organic sales improved 8% and international organic sales came in at 12%. While solid performance across Orthopaedics, MedSurg and Neurotechnology segments drove growth in the United States, robust gains in emerging markets, Europe, Japan and Canada led to higher international organic sales.

Stryker Corporation Price, Consensus and EPS Surprise


Stryker Corporation Price, Consensus and EPS Surprise

Stryker Corporation price-consensus-eps-surprise-chart | Stryker Corporation Quote

Segmental Analysis

Orthopaedic: In the quarter under review, revenues in the segment totaled $1.26 billion, up 7.8% year over year. The segment’s revenues improved 8.8% 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 $1.58 billion, up 9.2% year over year. Sales at the segment increased 10% at cc. Per management, the segment improved 11.5% organically in the reported quarter, led by strong Endoscopy, Instruments and Medical performances.

Neurotechnology & Spine: Sales in the segment grossed $749 million, up 19.4% year over year and 20.2% at cc. Organically, the segment witnessed growth of 7.4%. Per management, the upside was driven by solid performance in Neurotech and Interventional Spine businesses, offset by somewhat weak performance at the company’s core spine business.


In the third quarter, gross profit totaled $2.33 billion, up 8.1% from the year-ago quarter. Adjusted gross margin was 65.7%, down 50 bps.

Operating income totaled $628 million, up 9% from the prior-year quarter. Adjusted operating margin 25.4%, up 50 bps.

Financial Update

Cash and cash equivalents came in at $1.94 billion, up 11.1% sequentially.

Cash flow from operating activities as of Sep 30, 2019, came in at $1.46 billion, down 6.9% from the year-ago period.

2019 Outlook

Based on the performance to date and expected strength in the balance of the year, the company now expects the following:

Stryker expects 2019 organic net sales growth to be toward the higher end of the previously guided range of 7.5-8%.

On a full-year basis, adjusted EPS is expected in the band of $8.20 to $8.25. The Zacks Consensus Estimate is pegged at $8.21, within the company’s guided range.

For the fourth quarter of 2019, adjusted EPS is anticipated within $2.43 and $2.48. The Zacks Consensus Estimate stands at $2.45, within the company’s projected range.

Wrapping Up

Stryker exited the third quarter of 2019 on a mixed note, with earnings matching the consensus mark, while revenues surpassing the same. 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, solid performance in Neurotech and Interventional Spine businesses 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.

Zacks Rank

Stryker currently carries a Zacks Rank #2 (Buy).

Earnings of Other MedTech Majors at a Glance

Some other top-ranked stocks, which reported solid results this earning season, include Edwards Lifesciences EW, Thermo Fisher Scientific Inc. TMO and ResMed Inc. RMD. All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences delivered third-quarter 2019 adjusted EPS of $1.41, outpacing the Zacks Consensus Estimate by 15.6%. Third-quarter net sales of $1.09 billion surpassed the Zacks Consensus Estimate by 5.5%.

Thermo Fisher delivered third-quarter 2019 adjusted EPS of $2.94, which beat the Zacks Consensus Estimate by 2.1%. Revenues of $6.27 billion outpaced the Zacks Consensus Estimate by 1.3%.

ResMed reported third-quarter 2019 adjusted EPS of 93 cents, which beat the Zacks Consensus Estimate of 87 cents by 6.9%. Revenues were $681.1 million, surpassing the Zacks Consensus Estimate by 3.6%.

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