Stryker reports second quarter 2023 operating results

Author's Avatar
Aug 03, 2023

Kalamazoo, Michigan, Aug. 03, 2023 (GLOBE NEWSWIRE) -- Stryker (:SYK) reported operating results for the second quarter of 2023:

Second Quarter Results

  • Reported net sales increased 11.2% to $5.0 billion
  • Organic net sales increased 11.9%
  • Reported operating income margin of 19.3%
  • Adjusted operating income margin(1) increased 60 bps to 24.3%
  • Reported EPS increased 12.2% to $1.93
  • Adjusted EPS(1) increased 12.9% to $2.54
Second Quarter Net Sales Growth Overview
ReportedForeign Currency ExchangeConstant CurrencyAcquisitions / DivestituresOrganic
MedSurg and Neurotechnology 12.2 % (0.7) % 12.9 %% 12.9 %
Orthopaedics and Spine 9.9 (0.7) 10.6 10.6
Total11.2%(0.7) %11.9%%11.9%

"We delivered strong organic sales growth in the second quarter as demand for our products remains strong," said Kevin A. Lobo, Chair and CEO. "We are back on our margin expansion pathway, and our supercycle of innovation is going well."

Sales Analysis

Consolidated net sales of $5.0 billion increased 11.2% in the quarter and 11.9% in constant currency. Organic net sales increased 11.9% in the quarter including 11.4% from increased unit volume and 0.5% from higher prices.

MedSurg and Neurotechnology net sales of $2.9 billion increased 12.2% in the quarter and 12.9% in constant currency. Organic net sales increased 12.9% in the quarter including 11.5% from increased unit volume and 1.4% from higher prices.

Orthopaedics and Spine net sales of $2.1 billion increased 9.9% in the quarter and 10.6% in constant currency. Organic net sales increased 10.6% in the quarter including 11.3% from increased unit volume partially offset by 0.7% from lower prices.

Earnings Analysis

Reported net earnings of $738 million increased 12.5% in the quarter. Reported net earnings per diluted share of $1.93 increased 12.2% in the quarter. Reported gross profit margin and reported operating income margin were 63.7% and 19.3% in the quarter. Reported net earnings include certain items, such as charges for acquisition and integration-related activities, the amortization of purchased intangible assets, structural optimization and other special charges (including asset write-offs and impairments), costs to comply with certain medical device regulations, recall-related matters, regulatory and legal matters and tax matters. Excluding the aforementioned items, adjusted gross profit margin(1) was 63.9% in the quarter, and adjusted operating income margin(1) was 24.3% in the quarter. Adjusted net earnings(1) of $976 million increased 13.5% in the quarter. Adjusted net earnings per diluted share(1) of $2.54 increased 12.9% in the quarter.

2023 Outlook

Considering our year-to-date results, our strong order book for capital equipment and continued positive procedural trends, we now expect full year 2023 organic net sales growth(2) to be in the range of 9.5% to 10.5% including slightly positive pricing for the year. If foreign exchange rates hold near their current levels, we anticipate net sales will be unfavorably impacted by 0.3% and adjusted net earnings per diluted share(2) will be unfavorably impacted by $0.05 to $0.10 for the full year, both of which are included in our guidance. Based on our performance in the first half of the year, together with our strong sales momentum, we now expect adjusted net earnings per diluted share(2) to be in the range of $10.25 to $10.45.

(1) A reconciliation of the non-GAAP financial measures: adjusted gross profit margin, adjusted operating income and adjusted operating income margin, adjusted net earnings and adjusted net earnings per diluted share, to the most directly comparable GAAP measures: gross profit margin, operating income and operating income margin, net earnings and net earnings per diluted share, and other important information accompanies this press release.

(2) We are unable to present a quantitative reconciliation of our expected net sales growth to expected organic net sales growth as we are unable to predict with reasonable certainty and without unreasonable effort the impact and timing of acquisitions and divestitures and the impact of foreign currency exchange rates. We are unable to present a quantitative reconciliation of our expected net earnings per diluted share to expected adjusted net earnings per diluted share as we are unable to predict with reasonable certainty and without unreasonable effort the impact and timing of structural optimization and other special charges, acquisition-related expenses and fair value adjustments to inventory and the outcome of certain regulatory, legal and tax matters. The financial impact of these items is uncertain and is dependent on various factors, including timing, and could be material to our Consolidated Statements of Earnings

Conference Call on Thursday, August 3, 2023

As previously announced, we will host a conference call on Thursday, August 3, 2023 at 4:30 p.m., Eastern Time, to discuss our operating results for the quarter ended June 30, 2023 and provide an operational update.

Please register for this conference call at: https://www.veracast.com/webcasts/stryker/events/SYK2Q23.cfm. After registering, a confirmation will be sent via email, including dial-in details and unique conference call access codes required for call entry. Registration is open throughout the live call. To ensure you are connected prior to the beginning of the call, we suggest registering a minimum of 15 minutes before the start of the call.

A simultaneous webcast of the call will be accessible via the Investor Relations page of our website at www.stryker.com. For those not planning to ask a question of management, we recommend listening via the webcast. Please allow 15 minutes to register, download and install any necessary software.

Following the conference call, a replay will be available on our website up to one year from the time of the earnings call.

Caution Concerning Forward-Looking Statements

This press release contains information that includes or is based on forward-looking statements within the meaning of the federal securities law that are subject to various risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in such statements. Such factors include, but are not limited to: weakening of economic conditions, or the anticipation thereof, that could adversely affect the level of demand for our products; pricing pressures generally, including cost-containment measures that could adversely affect the price of or demand for our products; changes in foreign currency exchange markets; legislative and regulatory actions; unanticipated issues arising in connection with clinical studies and otherwise that affect United States Food and Drug Administration approval of new products; inflationary pressures; increased interest rates; supply chain disruptions; changes in reimbursement levels from third-party payors; a significant increase in product liability claims; the ultimate total cost with respect to recall-related matters; the impact of investigative and legal proceedings and compliance risks; resolution of tax audits; changes in tax laws and regulations; the impact of federal legislation to reform the United States healthcare system; costs to comply with medical device regulations; changes in financial markets; changes in our credit ratings; changes in the competitive environment; our ability to integrate and realize the anticipated benefits of acquisitions in full or at all or within the expected timeframes; our ability to realize anticipated cost savings; potential negative impacts resulting from environmental, social and governance (ESG) and sustainability related matters; the impact on our operations and financial results of the COVID-19 pandemic or any other public health emergency and any related policies and actions by governments or other third parties; and breaches or failures of our or our vendors' information technology systems or products, including by cyber-attack, data leakage, unauthorized access or theft. Additional information concerning these and other factors is contained in our filings with the United States Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We disclaim any intention or obligation to publicly update or revise any forward-looking statement to reflect any change in our expectations or in events, conditions or circumstances on which those expectations may be based, or that affect the likelihood that actual results will differ from those contained in the forward-looking statements.

Stryker is one of the world's leading medical technology companies and, together with our customers, we are driven to make healthcare better. We offer innovative products and services in Medical and Surgical, Neurotechnology, Orthopaedics and Spine that help improve patient and healthcare outcomes. Alongside our customers around the world, Stryker impacts more than 130 million patients annually. More information is available at www.stryker.com.

For investor inquiries please contact:

Jason Beach, Vice President, Investor Relations at 269-385-2600 or [email protected]

For media inquiries please contact:

Yin Becker, Vice President, Chief Corporate Affairs Officer at 269-385-2600 or [email protected]

STRYKER CORPORATION
For the Three and Six Months June 30
(Unaudited - Millions of Dollars, Except Per Share Amounts)
CONSOLIDATED STATEMENTS OF EARNINGS
Three MonthsSix Months
2023 2022 % Change2023 2022 % Change
Net sales$4,996$4,49311.2%$9,774$8,76811.5%
Cost of sales 1,815 1,667 8.9 3,577 3,208 11.5
Gross profit$3,181$2,82612.6%$6,197$5,56011.5%
% of sales 63.7 % 62.9 % 63.4 % 63.4 %
Research, development and engineering expenses 346 351 (1.4)
.4 % 13.9 %
Other income (expense), net (66) (52) 26.9 (122) (113) 8.0
Earnings before income taxes$899$72024.9%$1,578$1,10642.7%
Income taxes 161 64 151.6 248 127 95.3
Net earnings$738$65612.5%$1,330$97935.9%
Net earnings per share of common stock:
Basic$ 1.95 $ 1.73 12.7 %$ 3.51 $ 2.59 35.5 %
Diluted$ 1.93 $ 1.72 12.2 %$ 3.47 $ 2.56 35.5 %
Weighted-average shares outstanding (in millions):
Basic379.7 378.3 379.4 378.0
Diluted383.9 382.2 383.6 382.5
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30December 31
2023 2022
Assets
Cash and cash equivalents$ 1,401 $ 1,844
Marketable securities 77 84
Accounts receivable, net 3,261 3,565
Inventories 4,593 3,995
Prepaid expenses and other current assets 819 787
Total current assets$10,151$10,275
Property, plant and equipment, net 3,082 2,970
Goodwill and other intangibles, net 20,089 19,765
Noncurrent deferred income tax assets 1,439 1,410
Other noncurrent assets 2,648 2,464
Total assets$37,409$36,884
Liabilities and shareholders' equity
Current liabilities$ 6,584 $ 6,303
Long-term debt, excluding current maturities 11,149 11,857
Income taxes 469 641
Other noncurrent liabilities 1,846 1,467
Shareholders' equity 17,361 16,616
Total liabilities and shareholders' equity$37,409$36,884
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months
2023 2022
Operating activities
Net earnings$1,330$979
Depreciation 194 185
Amortization of intangible assets 322 310
Changes in operating assets, liabilities, income taxes payable and other, net (713) (742)