Yahoo Finance Stryker's (SYK) Q4 Earnings Beat Estimates, Volume Improves
Stryker Corporation SYK reported fourth-quarter 2022 adjusted earnings per share (EPS) of $3.00, which beat the Zacks Consensus Estimate of $2.84 by 5.6%. The bottom line improved 10.7% year over year.
However, GAAP EPS in the quarter of $1.47 was down 15% from the prior-year quarter.
Revenue Details
This Michigan-based medical device company reported revenues of $5.2 billion, which beat the Zacks Consensus Estimate of $4.95 billion by 5.1%. The top line improved 10.7% on a year-over-year basis and 14.5% at constant currency (cc). Sales were up 13.2% organically, indicating 13.8% growth in unit volume, which was offset by 0.6% due to lower prices.
Revenues by Geography
Revenues in the United States were $3.86 billion, up 13% year over year. International sales were up 4.4% to $1.34 billion. Excluding the negative impact of currency, International sales were up 18.3%. Strong growth in Europe, Canada, Australia and emerging markets drove the International sales during the quarter. However, hospital staffing pressures weighed on pockets around the globe, impeding growth.
Stryker Corporation Price, Consensus and EPS Surprise
Stryker Corporation price-consensus-eps-surprise-chart | Stryker Corporation Quote
Segmental Analysis
On Dec 31, 2021, Stryker updated its reportable business segments to align with its new internal reporting structure.
MedSurg and Neurotechnology: This segment reported sales of $3.05 billion, up 15.6% year over year and 19.3% at cc. Double-digit growth in the Surgical Technology business, emergency care, Prime Structure businesses and the U.S. Neurocranial business primarily drove segmental sales. Strong performances in Europe, Australia and emerging markets also boosted sales during the quarter. Per management, the segment saw 19.3% organic growth in the reported quarter.
Orthopedics and Spine: Sales in the segment amounted to $2.15 billion, up 4.3% year over year and 8.3% at cc. The upside can be attributed to continued procedural growth, the recent launch of the Insignia Hip Stem and Mako software upgrade.
Margins
In the fourth quarter, adjusted gross profit totaled $3.26 billion, up 5.6% from the year-ago quarter. However, the adjusted gross margin was 62.7%, down 310 basis points (bps).
Total operating expenses were $2.42 billion, up 8.8% from the year-ago quarter, primarily due to a goodwill impairment charge of $216 million related to Stryker’s Spine business.
Adjusted operating income amounted to $1.39 billion, up 7.9% from the prior-year quarter. However, the adjusted operating margin was 26.6%, down 70 bps.
Full-Year Results
Stryker recorded total revenues of $18.45 billion in 2022, up 7.8% year over year. Adjusted EPS for the full-year was $9.34, up 2.8% from the prior-year.
Financial Update
The company exited the fourth quarter with cash and cash equivalents of $1.84 billion, compared with $1.42 billion in the preceding quarter.
Cumulative net cash provided by operating activities in the fourth quarter was $2.62 billion, compared with $3.26 billion in the year-ago period.
2023 Guidance Issued
Stryker announced its guidance for total revenues and adjusted EPS for 2023. The company expects organic growth for total revenues to be 7-8.5% compared with 2022. It expects the good momentum to continue into 2023. However, macro-economic 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 $19.25 billion.
Stryker expects its adjusted EPS to be $9.85-$10.15 for 2023, implying growth of 7.1% at the midpoint of the range. The Zacks Consensus Estimate is pegged at $9.85 for the same. The company expects unfavorable currency movement to hurt growth modestly in 2023, if foreign currency exchange rates hold near current levels. It expects the price impact to be between 0% and -0.5%.
Wrapping Up
Stryker exited fourth-quarter 2022 on a strong note, wherein earnings and revenues surpassed the consensus estimate. The company witnessed strong performance across the segments in the United States. International sales also improved on the back of strong performances in Europe, Canada, Australia and emerging markets.
Per management, the company continues to face supply chain challenges and inflationary pressures. Moreover, ongoing negative foreign currency values are a concern. Stryker is taking action to lessen the negative price impact. 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 revenue and EPS guidance seems encouraging. Strong quarterly results and bright outlook for 2023 are likely to have swayed investors to drive Stryker’s share price up by 4.4% during after-hours trading on Jan 31. The company's shares have gained 21.4% in the past six months against the industry's decline of 2.3%. The S&P 500 Index declined 2.5% in the same period.
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However, the contraction in both gross and operating margins is disappointing. Stryker 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 Stocks to Consider
Some other stocks in the broader medical space that are scheduled to release quarterly results this month are McKesson MCK, Cardinal Health CAH and Laboratory Corp. of America LH. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McKesson has an Earnings ESP of +0.21% and a Zacks Rank of 2. MCK has an earnings yield of 6.6%, which compares favorably with the industry’s yield of 4.5%.
McKesson’s earnings surpassed estimates in two of the trailing four quarters and missed twice, with the average surprise being 4.79%.
Cardinal Health has an Earnings ESP of +5.75% and a Zacks Rank of 2. CAH has an estimated long-term growth rate of 11.7%.
Cardinal Health’s earnings surpassed estimates in two of the trailing four quarters and missed twice, with the average surprise being 3.04%.
Laboratory Corp. of America has an Earnings ESP of +2.67% and a Zacks Rank of 2 at present. LH has an earnings yield of 7%, which compares favorably with the industry’s yield of 4.5%.
Laboratory Corp. of America‘s earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 6.06%.
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