Stryker’s Q2 Earnings

After the closing bell, Stryker (SYK) reported second-quarter earnings of 73 cents a share. This was the same as last year’s Q2 and it was a penny a share better than consensus. Sales came in at $1.634 billion which was down 4.6% from last year’s second quarter. Adjusting for currency moves, it’s about flat.
This is a decent report, not great but in this environment, it’s certainly respectable. I wouldn’t be surprised if Stryker is at the trough of its earnings cycle—and if that means flat growth, that’s pretty good.
I was pleased to see the company back its previous guidance for full-year EPS of $2.90 to $3.10. In January, Stryker originally pegged this year in a range of $3.12 to $3.22. Then in April, they lowered it to the current range. Personally, I think $3 may be a stretch, but we’ll see. For comparison, last year came in at $2.83 and 2007 came in at $2.40.

Second Quarter Highlights
* Net sales of $1,634 million were flat (0.1% decrease) on a constant currency basis (4.6% decrease as reported)
* Orthopaedic Implants sales increased 5.1% on a constant currency basis (0.2% decrease as reported)
* MedSurg Equipment sales decreased 7.7% on a constant currency basis (11.0% decrease as reported)
* Net earnings decreased 4.7% from $306 million to $291 million
* Diluted net earnings per share were unchanged at $0.73
“In a challenging environment, we were very pleased with the growth of our U.S. Orthopaedic Implant businesses, which accelerated from last quarter and showed strong year-over-year gains. This performance, combined with our heavy focus on controlling costs across the company preserved our diluted earnings per share results in the face of the steep short term slowdown in our MedSurg businesses, and the foreign currency headwinds in the quarter,” commented Stephen P. MacMillan, President and Chief Executive Officer.
Net sales were $1,634 million for the second quarter of 2009, representing a 4.6% decrease compared to net sales of $1,713 million for the second quarter of 2008, and were $3,236 million for the first half of 2009, representing a 3.3% decrease compared to net sales of $3,347 million for the first half of 2008. On a constant currency basis, net sales decreased 0.1% for the second quarter and increased 1.6% for the first half.
Net earnings for the second quarter of 2009 were $291 million, representing a 4.7% decrease compared to net earnings of $306 million for the second quarter of 2008. Diluted net earnings per share for the second quarter of 2009 were unchanged at $0.73 compared to the second quarter of 2008. Net earnings for the first half of 2009 were $572 million, representing a 4.0% decrease compared to net earnings of $596 million for the first half of 2008. Diluted net earnings per share for the first half of 2009 increased 0.7% to $1.44 compared to $1.43 for the first half of 2008.
Sales Analysis
Domestic sales were $1,047 million for the second quarter of 2009, representing a decrease of 0.5%, as a 9.1% increase in shipments of Orthopaedic Implants was offset by an 11.0% decrease in shipments of MedSurg Equipment. Domestic sales were $2,089 million for the first half of 2009, representing an increase of 0.2%, as a result of a 7.5% increase in shipments of Orthopaedic Implants offset by an 8.0% decrease in shipments of MedSurg Equipment.
International sales were $587 million for the second quarter of 2009, representing a decrease of 11.0%. The impact of foreign currency comparisons to the dollar value of international sales was unfavorable by $77 million in the second quarter of 2009. On a constant currency basis, international sales increased 0.6% in the second quarter of 2009, as a result of a 0.4% increase in shipments of Orthopaedic Implants and a 1.1% increase in shipments of MedSurg Equipment. International sales were $1,146 million for the first half of 2009, representing a decrease of 9.1%. The impact of foreign currency comparisons to the dollar value of international sales was unfavorable by $164 million in the first half of 2009. On a constant currency basis, international sales increased 3.9% in the first half of 2009, as a result of a 3.3% increase in shipments of Orthopaedic Implants and a 5.2% increase in shipments of MedSurg Equipment.
Worldwide sales of Orthopaedic Implants were $1,014 million for the second quarter of 2009, representing a decrease of 0.2%, and were $1,987 million for both the first half of 2009 and 2008. On a constant currency basis, sales of Orthopaedic Implants increased 5.1% in the second quarter and 5.7% in the first half of 2009, based on higher shipments of reconstructive, trauma, spinal and craniomaxillofacial implant systems.
Worldwide sales of MedSurg Equipment were $620 million for the second quarter of 2009, representing a decrease of 11.0% as reported and 7.7% on a constant currency basis based on lower shipments of surgical equipment and surgical navigation systems; endoscopic, communications and digital imaging systems; and patient handling and emergency medical equipment. Worldwide sales of MedSurg Equipment were $1,248 million for the first half of 2009, representing a decrease of 8.2% as reported and 4.4% on a constant currency basis as higher shipments of surgical equipment and surgical navigation systems were offset by lower sales of endoscopic, communications and digital imaging systems and patient handling and emergency medical equipment.

The company also reduced its sales forecast by just a hair. Bottom line: This is a good stock and it’s still a relative bargain.

Posted by Eddy Elfenbein on July 21st, 2009 at 4:56 pm

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