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Stryker (SYK) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research
·4 min read

Stryker Corporation SYK is scheduled to release second-quarter 2020 results on Jul 30, after the closing bell. In the last reported quarter, the company delivered earnings surprise of 8.9%. Further, it beat estimates in each of the trailing four quarters, the average surprise being 3.2%.

Q2 Estimates

The Zacks Consensus Estimate for second-quarter earnings per share is pegged at 62 cents, indicating a decline of 68.7% from the year-ago quarter.

The same for revenues stands at $2.63 billion, suggesting a fall of 28.1% from the prior-year quarter.

Factors to Note

Stryker’s MedSurg segment comprises surgical instruments plus endoscopic and emergency medical equipment. It has three subsegments — Endoscopy, Instruments and Medical. Unlike first-quarter 2020, which had witnessed partial impact of the COVID-19 pandemic, the second quarter bore the brunt of it. This resulted in the deferral of elective and non-critical procedures.

Consequently, impact of the pandemic is likely to have weighed on the aforementioned subsegments, which in turn might get reflected on MedSurg unit’s second-quarter performance. In fact, the Zacks Consensus Estimate for the segment’s second-quarter revenues stands at $1.36 billion, suggesting a decline of 15.8% from the year-ago reported figure.

Stryker Corporation Price and EPS Surprise

Stryker Corporation Price and EPS Surprise
Stryker Corporation Price and EPS Surprise

Stryker Corporation price-eps-surprise | Stryker Corporation Quote

Weak performing Knee and Hips sub segment is likely to have weighed on the company’s Orthopaedic segment in the second quarter. In fact, the consensus mark for the segment’s second-quarter revenues stands at $703 million, indicating a plunge of 44.8% prior-year quarter.

With respect to Neurotechnology & Spine segment, weak performance by the NeuroTech and Interventional Spine businesses might have impacted the company’s second-quarter performance. For the upcoming quarterly announcement, the Zacks Consensus Estimate for the segment’s sales stands at $564 million, suggesting a decline of 25.8% from the year-ago quarter.

Nonetheless, sustained strong demand for Mako TKA (Total Knee Arthoplasty) platform or cementless knee and other 3D printed products is anticipated to get reflected in the segment’s second-quarter performance.

During fourth-quarter 2019, the company acquired Mobius Imaging — a leader in point-of-care imaging technology — and its sister company Cardan Robotics in an all-cash transaction for $370 million upfront and up to $130 million of contingent payments related to development and commercial milestones. This transaction is likely to have aided Stryker Spine foray into the intra-operative Imaging segment apart from aligning with the company’s implant and navigation offering. We expect this development to have positively impacted the company’s second-quarter performance.

However, unfavorable pricing may have affected Stryker’s second-quarter performance. Moreover, high debt might have put pressure on the margins.

What Our Quantitative Model Suggests

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here as you will see.

Earnings ESP: Stryker has an Earnings ESP of -12.58%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Stryker carries a Zacks Rank #3.

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

Integra LifeSciences Holdings Corporation IART has an Earnings ESP of +20.69% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exact Sciences Corporation EXAS has an Earnings ESP of +6.69% and a Zacks Rank of 2.

Hologic, Inc. HOLX has an Earnings ESP of +14.56% and a Zacks Rank of 3.

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