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Stryker (SYK) Q4 Earnings Surpass Estimates, Revenues Miss

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Stryker Corporation SYK reported fourth-quarter 2020 adjusted earnings per share (EPS) of $2.81, which beat the Zacks Consensus Estimate of $2.55 by 10.2%. Moreover, the bottom line improved 12.9% year over year.

For the full-year 2020, the company reported adjusted EPS of $7.43, which declined 10% on a year-over-year basis but surpassed the consensus mark by 3.6%.

Revenue Details

The Michigan-based medical device company reported revenues of $4.26 billion, which missed the Zacks Consensus Estimate by 1%. Nonetheless, the top line rose 3.2% on a year-over-year basis and 2% at constant currency (cc).

For the full-year 2020, the company delivered revenues of $14.35 billion, which not only declined 3.6% from the previous year but also missed the consensus mark by 0.4%.

Revenues by Geography

Revenues in United States were $3.09 billion, up 1.9% year over year. International sales were up 6.6% to $1.16 billion.

Segmental Analysis

Orthopaedic: In the quarter under review, revenues in the segment totaled $1.53 billion, up 4% year over year. The segment’s revenues rose 2.8% at cc. The upside can be attributed to strong performance at the Knees, Hips and Trauma and Extremities sub segments, and growth in Mako.

Stryker Corporation Price, Consensus and EPS Surprise

Stryker Corporation Price, Consensus and EPS Surprise
Stryker Corporation Price, Consensus and EPS Surprise

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

MedSurg: This segment reported sales of $1.85 billion, up 2.3% year over year. Sales at the segment rose 1.5% at cc. Per management, the segment increased 2.5% organically in the reported quarter, courtesy of higher demand for the company’s safety related products.

Neurotechnology and Spine: Sales in the segment amounted to $882 million, up 3.5% year over year and 2.1% at cc. Organically, the segment witnessed a rise of 4.3%. Per management, the upside can be attributed to growth in all the neurotech product lines in the fourth quarter.

Margins

In the fourth quarter, adjusted gross profit totaled $2.77 billion, up 1.4% from the year-ago quarter. Adjusted gross margin was 65.1%, down 120 basis points (bps).

Adjusted operating income amounted to $1.25 billion, up 6.4% from the prior-year quarter. Adjusted operating margin was 29.2%, up 90 bps.

Financial Update

The company exited the fourth quarter with cash and cash equivalents of $2.94 billion, compared with $7.08 billion in the prior quarter.

Cumulative net cash provided by operating activities in the fourth quarter were $3.28 billion, reflecting an increase of 49.6% from the year-ago period.

2021 Outlook

The company will continue to track and evaluate the impact of the COVID-19 pandemic on its operations and financial results. With the ongoing recovery from the pandemic, Stryker anticipates organic net sales growth between 8% and 10% from that of 2019.

Adjusted EPS is projected in the band of $8.80 to $9.20 (which includes the previously announced 10 cents of dilution driven by the buyout of Wright Medical for the full year).

Wrapping Up

Stryker exited fourth-quarter 2020 on a mixed note, wherein earnings surpassed the Zacks Consensus Estimate while revenues missed the same. Moreover, the company witnessed strong performance across its segments. Growth in international sales is also a positive. Further, expansion in operating margin in the reported quarter buoys optimism.

The company remains committed to continued advancement of its new product pipelines.

However, Stryker continues to grapple with pricing pressure. Also, contraction in gross margin is a negative. Stiff competition in the MedTech space also remains a concern.

Zacks Rank

Stryker currently carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks, which are expected to report earnings soon, include Hologic, Inc. HOLX, IDEXX Laboratories, Inc. IDXX and NextGen Healthcare, Inc. NXGN.

The Zacks Consensus Estimate for Hologic's first-quarter fiscal 2021 adjusted EPS is pegged at $2.14. The consensus estimate for revenues stands at $1.38 billion. The company currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX currently carries a Zacks Rank of 2 (Buy). The Zacks Consensus Estimate for fourth-quarter 2020 adjusted EPS currently stands at $1.43. The consensus estimate for fourth-quarter revenues is pegged at $677.5 million.

The Zacks Consensus Estimate for NextGen's third-quarter fiscal 2021 adjusted EPS is currently pegged at 25 cents. The consensus estimate for revenues stands at $140.9 million. Presently, the company carries a Zacks Rank of 2.

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