A month has gone by since the last earnings report for Stryker (
SYK Quick Quote SYK - Free Report) . Shares have lost about 7.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Stryker due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Stryker 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.
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. 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.
Strykerexited 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%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Stryker has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Stryker has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.