Summary
Stryker Corporation reported financial results for the second quarter and first six months of 2014, highlighting a mixed performance impacted by significant recall charges. While net sales showed year-over-year growth, driven by increased unit volume across key segments like MedSurg and Neurotechnology and Spine, net earnings and diluted EPS saw substantial declines due to a significant increase in charges related to the Rejuvenate and ABG II hip stem recalls. The company's balance sheet remains robust with total assets increasing to $17.2 billion. However, current liabilities also rose, largely due to an increase in accrued recall expenses. Stryker continued its strategic acquisition activity, closing deals for Berchtold, PST, and expecting to close the SBi acquisition. Investors should pay close attention to the ongoing impact of the hip stem recall, which has necessitated a substantial increase in reserves and is expected to continue to weigh on profitability in the near term.
Financial Highlights
51 data points| Revenue | $2.36B |
| Cost of Revenue | $815.00M |
| Gross Profit | $1.55B |
| R&D Expenses | $158.00M |
| SG&A Expenses | $870.00M |
| Operating Expenses | $1.35B |
| Operating Income | $197.00M |
| Net Income | $128.00M |
| EPS (Basic) | $0.34 |
| EPS (Diluted) | $0.33 |
| Shares Outstanding (Basic) | 378.80M |
| Shares Outstanding (Diluted) | 382.70M |
Key Highlights
- 1Net sales increased by 6.8% to $2.36 billion for the three months ended June 30, 2014, and by 6.1% to $4.67 billion for the six months ended June 30, 2014, driven by unit volume and acquisitions.
- 2Net earnings for the three months ended June 30, 2014, decreased by 39.9% to $128 million, and by 61.7% to $198 million for the six months ended June 30, 2014, primarily due to significant recall charges.
- 3Diluted EPS decreased to $0.33 for the three months and $0.51 for the six months ended June 30, 2014, compared to $0.56 and $1.35 respectively in the prior year periods.
- 4The company recorded significant charges related to the Rejuvenate and ABG II hip stem recalls, with an updated estimated probable loss range of $1.4 billion to $2.09 billion and an additional $270 million charge recognized in the second quarter of 2014.
- 5Stryker completed several acquisitions during the period, including Berchtold Holding AG and Patient Safety Technologies, Inc., and announced its intention to acquire Small Bone Innovations, Inc., bolstering its product offerings in various segments.
- 6Total assets grew to $17.2 billion as of June 30, 2014, up from $15.7 billion as of December 31, 2013, supported by acquisitions and increased marketable securities.
- 7Cash provided by operating activities remained strong, totaling $366 million for the three-month period and $572 million for the six-month period ended June 30, 2014.