10-QPeriod: Q2 FY2017

STRYKER CORP Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 28, 2017For Securities:SYK

Summary

Stryker Corporation's Q2 2017 results demonstrate continued top-line growth, with consolidated net sales increasing by 6.1% year-over-year, reaching $3.01 billion. This growth was driven by a solid performance across its core segments, particularly MedSurg and Neurotechnology and Spine, with organic sales growth (excluding acquisitions and currency impacts) also showing strength. The company reported net earnings of $391 million, a modest increase from the prior year, with diluted EPS at $1.03. Financially, Stryker maintained a strong balance sheet with total assets of $21.3 billion and shareholders' equity of $10.0 billion. Operating cash flow remained robust, providing ample liquidity for operations and strategic investments. The company also highlighted its ongoing commitment to returning capital to shareholders through dividends and share repurchases, alongside strategic acquisitions like the announced deal for NOVADAQ Technologies Inc., aimed at enhancing its product portfolio.

Financial Highlights

52 data points
Beta

Revenue

$3.01B

66.1% Gross Margin

Net Income

$391.00M

13.0% Net Margin

EPS (Diluted)

$1.03

Total Assets

$21.29B

Cash & Equivalents

$3.65B

Free Cash Flow

$519.00M

Financial Statements
Beta
Revenue$3.01B
Cost of Revenue$1.02B
Gross Profit$1.99B
R&D Expenses$192.00M
SG&A Expenses$1.13B
Operating Expenses$1.49B
Operating Income$502.00M
Net Income$391.00M
EPS (Basic)$1.04
EPS (Diluted)$1.03
Shares Outstanding (Basic)373.90M
Shares Outstanding (Diluted)379.80M

Key Highlights

  • 1Consolidated net sales grew 6.1% to $3.01 billion for the three months ended June 29, 2017, and 11.8% to $5.97 billion for the six months ended June 29, 2017, driven by organic growth and acquisitions.
  • 2Net earnings for the three months were $391 million, resulting in diluted EPS of $1.03, a slight increase from the prior year's $1.00 per share.
  • 3The MedSurg segment showed significant growth, with net sales up 6.2% for the quarter, bolstered by strong performance in endoscopy and instruments.
  • 4The company announced an agreement to acquire NOVADAQ Technologies Inc. for approximately $701 million, expected to close in Q3 2017, to expand its MedSurg segment offerings.
  • 5Operating cash flow for the first six months of 2017 was $801 million, demonstrating strong cash generation to fund operations and investments.
  • 6Stryker repurchased $230 million of its common stock and paid $318 million in dividends during the first six months of 2017, reflecting a commitment to shareholder returns.
  • 7The company continues to manage significant recall charges related to the Rejuvenate and ABG II hip stems, with an estimated probable loss range of $2.04 billion to $2.29 billion.

Frequently Asked Questions

Stryker reported consolidated net sales of $3.01 billion, representing a 6.1% increase compared to the same period in 2016. Net earnings were $391 million, with diluted earnings per share (EPS) of $1.03, up from $1.00 in the prior year's second quarter. The company highlighted strong organic sales growth, excluding currency impacts and acquisitions.

All three segments contributed to growth. Orthopaedics saw a 5.5% increase in net sales for the quarter, while MedSurg increased by 6.2%, and Neurotechnology and Spine grew by 6.9%. MedSurg's performance was notably strong in endoscopy and instruments, while Neurotechnology and Spine benefited from increased shipments of neurotechnology products.

A significant ongoing item is the recall charges related to the Rejuvenate and ABG II hip stems, which contributed $72 million in charges for the quarter. The company has estimated a probable loss range of approximately $2.04 billion to $2.29 billion for this matter, which could materially impact future financial results. Additionally, the company is dealing with legal matters, including an ongoing patent dispute with Zimmer Biomet, which could result in significant judgments.

Stryker is pursuing growth through both organic sales increases and strategic acquisitions. The announced acquisition of NOVADAQ Technologies Inc. for approximately $701 million is a key example of this strategy. The company also focuses on returning capital to shareholders through dividends and share repurchases, as evidenced by $230 million in share repurchases and $318 million in dividends paid in the first six months of 2017.