Stryker (SYK) Q4 Earnings And Revenues Surpass Estimates

Stryker Corporation (NYSE:SYK) reported fourth-quarter 2019 adjusted earnings per share (EPS) of $2.49, which beat the Zacks Consensus Estimate by 1.2%. Further, the bottom line improved 14.2% year over year and exceeded the high end of management’s guidance range.

The Michigan-based medical device company reported revenues of $4.13 billion, which outpaced the Zacks Consensus Estimate by 0.7%. Revenues improved 8.8% on a year-over-year basis and 9.4% at constant currency (cc).

2019 at a Glance

In 2019, the company reported revenues worth $14.88 billion, which beat the Zacks Consensus Estimate. On a year-over-year basis, the top line improved 9.4%.

Adjusted EPS for the year was $8.26, which beat the Zacks Consensus Estimate by 0.4%. The bottom line also increased 13% year over year.

Revenues by Geography

Revenues in United States came in at $3.04 billion, up 9.8% year over year. International sales were up 6.2% to $1.09 billion.

U.S. organic sales improved 8.2% and international organic sales came in at 7.6%. 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.

Segmental Analysis

Orthopaedic: In the quarter under review, revenues in the segment totaled $1.47 billion, up 6.7% year over year. The segment’s revenues improved 7.3% at cc. The performance can be attributed to better results at the Knees, Hips and Other sub segments. The company continues to witness solid demand for Mako TKA (Total Knee Arthoplasty) platform or cementless knee and other 3D printed products.

MedSurg: This segment reported sales of $1.84 billion, up 6.8% year over year. Sales at the segment increased 7.4% at cc. Per management, the segment improved 6.8% organically in the reported quarter, led by strong Endoscopy, Instruments and Medical performances.

Neurotechnology & Spine: Sales in the segment amounted to $827 million, up 18% year over year and 18.2% at cc. Organically, the segment witnessed growth of 12.5%. Per management, the upside was driven by solid performance by the neurotech product lines.

Margins

In the fourth quarter, gross profit totaled $2.70 billion, up 10.1% from the year-ago quarter. Adjusted gross margin was 66.3%, up 60 bps.

Operating income totaled $944 million, up 35.2% from the prior-year quarter. Adjusted operating margin was 28.3%, up 80 bps.

Financial Update

Cash and cash equivalents came in at $4.34 billion, up 19.9% from the year-ago quarter.

Cash flow from operating activities as of Dec 31, 2019, came in at $2.19 billion, down 16.1% from the year-ago period.

2020 Outlook

Stryker expects 2020 organic net sales growth to be in the range of 6.5-7.5%.

On a full-year basis, adjusted EPS is expected in the band of $9.00 to $9.20. The Zacks Consensus Estimate is pegged at $9.03, within the company’s guided range.

For first-quarter 2020, adjusted EPS is anticipated within $2.05 and $2.10. The Zacks Consensus Estimate stands at $2.05, within the company’s projected range.

Wrapping Up

Stryker exited fourth-quarter 2019 on a strong note, with both earnings and revenues beating their respective consensus marks. 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 by the neurotech product lines 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 2020 is indicative of bright prospects.

However, pricing pressure continues to plague Stryker. 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 in the broader medical space are SeaSpine Holdings Corporation (NASDAQ:SPNE) , STERIS plc (NYSE:STE) and DexCom, Inc. (NASDAQ:DXCM) , all three carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The Zacks Consensus Estimate for SeaSpine’s fourth-quarter 2019 revenues is pegged at $43.6 million, suggesting growth of 14.7% from the prior-year reported figure. The same for loss per share is anticipated at 44 cents, indicating an improvement of 16.9% from the year-ago reported figure.

The Zacks Consensus Estimate for STERIS’s third-quarter fiscal 2020 revenues is pegged at $749.7 million, indicating an improvement of 7.7% from the year-earlier reported figure. The same for adjusted earnings per share stands at $1.43, indicating growth of 13.5% from the year-ago reported figure.

The Zacks Consensus Estimate for DexCom’s fourth-quarter 2019 revenues is pegged at $457 million, suggesting growth of 35.2% from the prior-year reported figure. The same for adjusted earnings per share stands at 72 cents, indicating an improvement 33.3% from the prior-year reported figure.

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