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Stryker Corporation (SYK - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $2.81, which beat the Zacks Consensus Estimate of $2.79 by 0.7%. The bottom line also improved 10.6% year over year.
GAAP EPS was $2.14, up 10.9% from the year-ago quarter’s level.
Price Performance
SYK’s shares have risen 10.3% year to date compared with the industry's growth of 4.3%. The S&P 500 Index has increased 14.8% in the same period.
Image Source: Zacks Investment Research
Revenue Details
Revenues totaled $5.42 billion, which beat the Zacks Consensus Estimate by 0.3%. The top line also improved 8.5% on a year-over-year basis and 9.4% at constant currency (cc).
Revenues by Geography
Revenues in the United States amounted to $4.05 billion, up 9.1% from the prior year quarter. International sales increased 7% year over year to $1.38 billion.
Segmental Analysis
MedSurg and Neurotechnology: This segment reported sales of $3.12 billion, up 9% year over year and 9.8% at cc. Sales growth was driven by increased unit volume as well as higher prices.
Orthopedics and Spine: Sales in the segment amounted to $2.31 billion, up 7.9% year over year and 8.9% at cc. This growth was driven by increased unit volume, partially offset by lower prices.
In the quarter, MedSurg and Neurotechnology recorded organic sales growth of 9.7%, which included 10.1% of U.S. organic growth and 8.2% of international organic growth. Instruments recorded U.S. organic sales growth of 11.9% led by strong double-digit growth in the surgical technologies business.
Margins
Adjusted gross profit totaled $3.48 billion in the reported quarter, up 8.8% from the year-ago quarter’s level. Adjusted gross margin was 64.2%, up 35 basis points (bps).
Total operating expenses were $2.37 billion, up 6.7% from the year-ago quarter’s level.
Adjusted operating income totaled $1.33 billion, up 9% from a year ago. Adjusted operating margin was 24.6%, up 26 bps.
Financial Update
Stryker exited the second quarter with cash and cash equivalents of $1.96 billion compared with $2.41 billion at the end of the first quarter of 2024.
Cumulative net cash provided by operating activities totaled $837 million compared with $1.13 billion a year ago.
2024 Guidance
Stryker updated its guidance for 2024. The company now expects total revenues to grow in the range of 9.0% to 10.0% on an organic basis compared with the earlier guidance of 8.5-9.5%. The Zacks Consensus Estimate for total revenues is pegged at $22.3 billion, implying growth of 8.9%. Based on the steady progress of the company’s pricing actions, it expects a favorable pricing impact of approximately 0.5%.
SYK expects adjusted EPS in the band of $11.90 to $12.10, implying growth of 12% at the midpoint of the guided range. The Zacks Consensus Estimate for earnings is pegged at $11.95 per share. The company previously expected earnings in the range of $11.85-$12.05 per share.
If foreign exchange rates hold near current levels, the company anticipates a moderately unfavorable impact on full-year net sales.
Wrapping Up
Stryker exited second-quarter 2024 on a strong note, wherein both earnings and revenues beat the respective Zacks Consensus Estimate. The company witnessed a strong performance in the U.S. market, notably in Instruments, Medical, Endoscopy, Trauma and Extremities and Mako. Strong International sales also buoyed optimism. SYK expects the momentum in the international market to accelerate in the rest of 2024.
Stryker is set to expand through strategic mergers and acquisitions in 2024. In July, the company acquired Artelon, a specialist in innovative soft tissue fixation products for foot, ankle and sports medicine procedures.
Stryker is poised for significant growth with several upcoming launches. Pangea is expected to achieve full U.S. availability by the second half of 2025. The recently launched LIFEPAK 35 defibrillator and monitor, introduced at the end of the second quarter, is generating substantial market excitement and promises a multiyear benefit to Stryker's medical division.
Additionally, the FDA granted clearance for the Spine Guidance 5 Software featuring Copilot, which enhances surgical precision and patient safety with smart powered instruments. This innovation is a key milestone in Stryker's development pipeline, with Mako Spine featuring Copilot set to be launched in the fourth quarter. Mako Shoulder is expected to be launched by the end of the year.
Moreover, the expansion in both gross and operating margins is reassuring. However, stiff competition in the MedTech space is a concern.
Stryker Corporation Price, Consensus and EPS Surprise
Currently, Stryker carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% increase.
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Stryker's (SYK) Q2 Earnings Beat Estimates, Guidance Raised
Stryker Corporation (SYK - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $2.81, which beat the Zacks Consensus Estimate of $2.79 by 0.7%. The bottom line also improved 10.6% year over year.
GAAP EPS was $2.14, up 10.9% from the year-ago quarter’s level.
Price Performance
SYK’s shares have risen 10.3% year to date compared with the industry's growth of 4.3%. The S&P 500 Index has increased 14.8% in the same period.
Image Source: Zacks Investment Research
Revenue Details
Revenues totaled $5.42 billion, which beat the Zacks Consensus Estimate by 0.3%. The top line also improved 8.5% on a year-over-year basis and 9.4% at constant currency (cc).
Revenues by Geography
Revenues in the United States amounted to $4.05 billion, up 9.1% from the prior year quarter. International sales increased 7% year over year to $1.38 billion.
Segmental Analysis
MedSurg and Neurotechnology: This segment reported sales of $3.12 billion, up 9% year over year and 9.8% at cc. Sales growth was driven by increased unit volume as well as higher prices.
Orthopedics and Spine: Sales in the segment amounted to $2.31 billion, up 7.9% year over year and 8.9% at cc. This growth was driven by increased unit volume, partially offset by lower prices.
In the quarter, MedSurg and Neurotechnology recorded organic sales growth of 9.7%, which included 10.1% of U.S. organic growth and 8.2% of international organic growth. Instruments recorded U.S. organic sales growth of 11.9% led by strong double-digit growth in the surgical technologies business.
Margins
Adjusted gross profit totaled $3.48 billion in the reported quarter, up 8.8% from the year-ago quarter’s level. Adjusted gross margin was 64.2%, up 35 basis points (bps).
Total operating expenses were $2.37 billion, up 6.7% from the year-ago quarter’s level.
Adjusted operating income totaled $1.33 billion, up 9% from a year ago. Adjusted operating margin was 24.6%, up 26 bps.
Financial Update
Stryker exited the second quarter with cash and cash equivalents of $1.96 billion compared with $2.41 billion at the end of the first quarter of 2024.
Cumulative net cash provided by operating activities totaled $837 million compared with $1.13 billion a year ago.
2024 Guidance
Stryker updated its guidance for 2024. The company now expects total revenues to grow in the range of 9.0% to 10.0% on an organic basis compared with the earlier guidance of 8.5-9.5%. The Zacks Consensus Estimate for total revenues is pegged at $22.3 billion, implying growth of 8.9%. Based on the steady progress of the company’s pricing actions, it expects a favorable pricing impact of approximately 0.5%.
SYK expects adjusted EPS in the band of $11.90 to $12.10, implying growth of 12% at the midpoint of the guided range. The Zacks Consensus Estimate for earnings is pegged at $11.95 per share. The company previously expected earnings in the range of $11.85-$12.05 per share.
If foreign exchange rates hold near current levels, the company anticipates a moderately unfavorable impact on full-year net sales.
Wrapping Up
Stryker exited second-quarter 2024 on a strong note, wherein both earnings and revenues beat the respective Zacks Consensus Estimate. The company witnessed a strong performance in the U.S. market, notably in Instruments, Medical, Endoscopy, Trauma and Extremities and Mako. Strong International sales also buoyed optimism. SYK expects the momentum in the international market to accelerate in the rest of 2024.
Stryker is set to expand through strategic mergers and acquisitions in 2024. In July, the company acquired Artelon, a specialist in innovative soft tissue fixation products for foot, ankle and sports medicine procedures.
Stryker is poised for significant growth with several upcoming launches. Pangea is expected to achieve full U.S. availability by the second half of 2025. The recently launched LIFEPAK 35 defibrillator and monitor, introduced at the end of the second quarter, is generating substantial market excitement and promises a multiyear benefit to Stryker's medical division.
Additionally, the FDA granted clearance for the Spine Guidance 5 Software featuring Copilot, which enhances surgical precision and patient safety with smart powered instruments. This innovation is a key milestone in Stryker's development pipeline, with Mako Spine featuring Copilot set to be launched in the fourth quarter. Mako Shoulder is expected to be launched by the end of the year.
Moreover, the expansion in both gross and operating margins is reassuring. However, stiff competition in the MedTech space is a concern.
Stryker Corporation Price, Consensus and EPS Surprise
Stryker Corporation price-consensus-eps-surprise-chart | Stryker Corporation Quote
Zacks Rank and Stocks to Consider
Currently, Stryker carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% increase.