Yahoo Finance Stryker (SYK) Q1 Earnings Beat Estimates, Volume Improves
Stryker Corporation SYK reported first-quarter 2023 adjusted earnings per share (EPS) of $2.14, which beat the Zacks Consensus Estimate of $2.00 by 7%. The bottom line also improved 8.6% year over year.
GAAP EPS was $1.54, up 83.3% from that recorded in the prior-year quarter.
Revenue Details
Reported revenues were $4.8 billion, which beat the Zacks Consensus Estimate of $4.55 billion by 5%. The top line improved 11.8% on a year-over-year basis and 14% at constant currency (cc). Sales were up 13.6% organically, indicating 12.9% growth in unit volume and 0.7% due to higher prices.
Revenues by Geography
Revenues in the United States were $3.51 billion, up 13.1% year over year. International sales increased 8.2% to $1.27 billion. International sales were up 16.5%, excluding the negative impact of currency. Strong growth in Europe, Canada, Australia and Japan drove International sales during the quarter.
Segmental Analysis
MedSurg and Neurotechnology: This segment reported sales of $2.69 billion, up 11% year over year and 13.1% at cc. Double-digit growth in the Surgical Technology business as well as Endoscopy and Medical businesses primarily drove sales. Strong performances in Europe, Australia, Canada and Japan also boosted revenues. Per management, the segment witnessed 12.4% organic growth in the reported quarter.
Orthopedics and Spine: Sales in the segment amounted to $2.09 billion, up 12.7% year over year and 15.1% at cc. The top line increased 15.2% organically. This upside can be attributed to continued procedural growth, strong uptake of the Insignia Hip Stem and the recent launch of Q Guidance Navigation System. Strong performances in Europe, Australia, Canada and emerging markets also boosted International sales during the quarter.
Stryker Corporation Price, Consensus and EPS Surprise
Stryker Corporation price-consensus-eps-surprise-chart | Stryker Corporation Quote
Margins
Adjusted gross profit totaled $3.02 billion in the reported quarter, up 10.1% from the year-ago quarter’s figure. Adjusted gross margin was 63.2%, down 90 basis points (bps). The decline reflects higher manufacturing and supply-chain costs.
Total operating expenses were $2.28 billion, down 0.3% from the year-ago quarter, primarily due to inflationary pressure.
Adjusted operating income totaled $1.01 billion, up 7.7% from that reported in the prior-year quarter. Adjusted operating margin was 21.1%, down 70 bps.
Financial Update
Stryker exited the first quarter with cash and cash equivalents of $1.67 billion compared with $1.84 billion in the preceding quarter.
Cumulative net cash provided by operating activities in the first quarter was $445 million compared with $203 million in the year-ago period.
2023 Guidance Raised
Stryker announced its updated guidance for 2023. The company now expects organic growth for total revenues to be 8-9%, up from its previous expectation of 7-8.5%. However, macroeconomic volatility is likely to persist due to alleviating supply-chain disruptions, inflationary risks and currency fluctuations. The Zacks Consensus Estimate for total revenues stands at $19.75 billion.
SYK now expects adjusted EPS in the band of $10.05-$10.25, implying growth of 8.7% at the midpoint of the range. The previously guided range was $9.85-$10.15. The Zacks Consensus Estimate is pegged at $10.02 for the same.
The company expects unfavorable currency movement to hurt growth modestly in 2023, especially in the first half. It expects the price impact to be relatively neutral compared to its previous expectation of an impact of 0-0.5%.
Wrapping Up
Stryker exited first-quarter 2023 on a strong note, wherein both earnings and revenues beat estimates. The company witnessed strong performance across its segments in the United States. Strong International sales also buoy optimism. It expects the momentum to continue into 2023 on the back of ongoing procedural recovery and a strong order book for capital equipment.
Per management, Stryker continues to face supply-chain challenges and inflationary pressures. Moreover, ongoing negative foreign currency values are a concern. The company has taken steps to alleviate the negative price impact, which got reflected in the first quarter results.
It is also taking several cost-cutting initiatives, including restructuring plans. Stryker’s prospects in 2023 seem promising on the back of strong customer demand for its existing products as well as new launches. The company’s guidance for earnings and revenues appears encouraging.
However, the contraction in both gross and operating margins is disappointing. SYK continues to grapple with pricing pressure. Stiff competition in the MedTech space is a concern.
Zacks Rank
Stryker currently carries a Zacks Rank #2 (Buy).
Other Key Picks
Some other stocks in the broader medical space that have announced their quarterly results are Intuitive Surgical ISRG, Chemed CHE and Edwards Lifesciences EW, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intuitive Surgical reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate of $1.19. Revenues of $1.7 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average surprise being 1.86%.
Chemed reported first-quarter 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 0.2%. Revenues of $560 million outpaced the consensus mark by 2.6%.
Chemed has a long-term estimated growth rate of 8.8%. CHE’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.12%.
Edwards Lifesciences reported first-quarter 2023 adjusted earnings of 62 cents per share, which beat the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion surpassed the Zacks Consensus Estimate by 4.7%.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 1.69%.
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