Stryker Management Very Bullish on Procedures and Capital Purchases Heading into FY24; Likely Right in Short-Term, but Broader Industry Trends Support Caution
11-3-23 (by: Scott Gleason) Stryker has reported its third-quarter performance with net sales increasing 9.6% to $4.9 billion compared to consensus estimates of $4.86 million. Organic net sales increased by 9.2%. MedSurg and Neurotechnology sales increased by 10.5% fueled by increased unit volume and higher prices. Orthopedics and Spine net sales experienced 8.4% growth with increased unit volume, offset slightly by lower prices. While results were above expectations, orthopedic implant growth slowed from the start of the year showing signs that elective procedures could be declining on a global basis with a deteriorating consumer environment. However, management noted that they believe patient backlog will support orthopedic demand through year end and into 2024.
In extremities management noted the recent FDA approval and pending 2Q23 launch of its Pangea plating system which it called the, “biggest launch in extremities history.” The system is anatomically contoured to support a large range of fractures.
Management also noted a large backlog of capital equipment purchases supporting strong capital sales growth in the fourth quarter for MedSurg. Management noted on the call that the rate environment is not impacting demand for capital purchases.
The company’s adjusted operating income margin increased by 110 basis points (bps) to 23.4 in the third quarter and adjusted EPS increased by an 16.0% to $2.46. Street forecasts has called for adjusted EPS of $2.43.
Stryker now expects full-year 2023 organic net sales growth to be in the range of 10.0% to 10.5%, including slightly positive pricing for the year, at the high end of previous guidance.
Kevin A. Lobo, Chair and CEO of Stryker, commented on the results, saying, “We delivered another quarter of strong organic sales growth and continued margin expansion. The positive momentum in our business remains intact, including a strong procedural environment and our supercycle of innovation.”