Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stryker Corp (SYK, Financial) reported robust organic sales growth of 11.5% in the third quarter, with strong performance across medsurg, neurotechnology, orthopedics, and spine segments.
- The company achieved double-digit organic growth in several key areas, including medical, neurocranial, endoscopy, trauma and extremities, hips, and knees.
- Stryker Corp (SYK) completed several strategic acquisitions, including care.ai, NICO Corporation, and Vertos Medical, enhancing its healthcare IT, minimally invasive surgery, and pain management portfolios.
- The company delivered an adjusted quarterly EPS of $2.87, reflecting a 16.7% increase compared to the third quarter of 2023.
- Stryker Corp (SYK) is on track to achieve its goal of 200 basis points of margin expansion by the end of 2025, with 100 basis points expected this year.
Negative Points
- The company's neurovascular segment faced challenges, with US organic sales growth of only 1.5%, impacted by supply chain issues and competitive pressures in the ischemic business.
- Foreign currency had a 0.1% unfavorable impact on sales, and the adjusted gross margin was 20 basis points unfavorable compared to the third quarter of 2023.
- The US spine business showed modest organic growth of 2.4%, with some segments experiencing a slight decline.
- Stryker Corp (SYK) anticipates a slight unfavorable impact on full-year sales and a $0.10 negative impact on adjusted EPS due to foreign exchange rates.
- The company faces competitive pressures in the ischemic stroke segment, requiring potential sales force adjustments to improve performance.
Q & A Highlights
Q: Kevin, medical really stands out with 60% of sales in medsurg and neurotech, and medical grew closer to 20% this quarter. Can you elaborate on what's driving this growth and its sustainability?
A: Kevin Lobo, CEO: Our medical business has been consistently high-growing over the past five years, driven by innovation and momentum in products like ProCuity, wireless stretchers, and LIFEPAK 35. The Sage business is performing extremely well, and recent acquisitions like care.ai will further enhance our offerings. While 18% growth may not happen every quarter, double-digit growth is expected to continue.
Q: The fourth-quarter implied guide seems slightly below trend. Are there any disruptions, like hurricanes, affecting this?
A: Kevin Lobo, CEO: We don't anticipate any significant disruptions from hurricanes. The guide is reasonable, and we're aiming for the high end, closer to 10% organic growth. We're running against big comps from last year, but the business momentum remains strong.
Q: How sustainable is the momentum in top-line growth for 2025, and what are the drivers of the 100 basis points of margin expansion?
A: Jason Beach, VP of Investor Relations: We'll discuss 2025 in more detail in January, but we're committed to 100 basis points of operating margin expansion. Glenn Boehnlein, CFO: Initiatives like low-cost manufacturing, insourcing, and freight optimization are driving leverage. We're also focusing on shared services and IT system rationalization.
Q: The hip growth was strong in Q3, especially outside the US. What drove this, and how sustainable is it?
A: Kevin Lobo, CEO: The Insignia launch is spreading globally, and Mako Hip is gaining traction. The SERF acquisition in Europe is ahead of expectations. We're seeing strong momentum in both international and US markets, driven by product innovation and market expansion.
Q: Can you comment on early feedback for Mako Spine?
A: Kevin Lobo, CEO: It's early, but so far, Mako Spine is performing as expected. We're also excited about Copilot, which launched ahead of Mako Spine. These products are on a limited market release as we refine training protocols, and we expect them to be successful for our spine business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
