10-QPeriod: Q3 FY2019

STRYKER CORP Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 30, 2019For Securities:SYK

Summary

Stryker Corporation's third-quarter 2019 report shows robust top-line growth, with net sales increasing by 10.6% to $3.59 billion compared to the same period in 2018. This growth was driven by solid performance across all segments, particularly Neurotechnology and Spine, which saw a 19.4% increase in sales. The company also reported an 8.1% rise in gross profit to $2.33 billion, demonstrating effective cost management. Despite strong sales, net earnings decreased by 21.0% to $466 million, or $1.23 per diluted share, primarily due to higher recall charges and increased amortization of intangible assets stemming from recent acquisitions. However, adjusted net earnings per diluted share saw a healthy 13.0% increase, indicating strong operational performance excluding certain one-time items. The company maintained a strong balance sheet with total assets of $26.66 billion and a healthy current ratio, positioning it well for future growth and strategic initiatives.

Financial Highlights

51 data points
Beta

Revenue

$3.59B

65.0% Gross Margin

Net Income

$466.00M

13.0% Net Margin

EPS (Diluted)

$1.23

Total Assets

$26.66B

Cash & Equivalents

$1.95B

Free Cash Flow

$466.00M

Financial Statements
Beta
Revenue$3.59B
Cost of Revenue$1.26B
Gross Profit$2.33B
R&D Expenses$246.00M
SG&A Expenses$1.29B
Operating Expenses$1.70B
Operating Income$628.00M
Net Income$466.00M
EPS (Basic)$1.24
EPS (Diluted)$1.23
Shares Outstanding (Basic)374.20M
Shares Outstanding (Diluted)380.30M

Key Highlights

  • 1Net sales increased by 10.6% to $3.59 billion in Q3 2019, with organic sales growth (excluding acquisitions and currency) of 9.3%.
  • 2All three business segments (Orthopaedics, MedSurg, Neurotechnology and Spine) reported sales growth, with Neurotechnology and Spine showing the strongest performance at 19.4%.
  • 3Gross profit increased by 8.1% to $2.33 billion, resulting in a gross margin of 65.0%, a slight decrease from 66.5% in the prior year.
  • 4Net earnings decreased by 21.0% to $466 million, impacted by recall charges and amortization of intangible assets.
  • 5Adjusted net earnings per diluted share increased by a strong 13.0% to $1.91, highlighting operational improvements.
  • 6The company repaid $1.341 billion in debt during the first nine months of 2019, reducing its long-term debt.
  • 7Cash flow from operations was $1.46 billion for the nine months ended September 30, 2019, down from $1.56 billion in the prior year period.

Frequently Asked Questions

Stryker reported a 10.6% increase in net sales for the third quarter of 2019, reaching $3.59 billion, compared to $3.24 billion in the same period of 2018. This growth was driven by strong performance across all business segments, particularly Neurotechnology and Spine.

Net earnings decreased by 21.0% to $466 million ($1.23 per diluted share) in Q3 2019. This decline was primarily due to higher recall charges ($49 million vs. $4 million in Q3 2018) and increased amortization of intangible assets ($116 million vs. $112 million), largely resulting from recent acquisitions.

Acquisitions contributed to sales growth, with their impact noted as 2.9% on constant currency sales for the quarter. However, they also led to increased amortization of intangible assets and acquisition-related integration costs, which impacted net earnings. Stryker completed several acquisitions, including OrthoSpace in March 2019 and Mobius Imaging and Cardan Robotics in October 2019.

Stryker maintained a strong financial position with total assets of $26.66 billion and total shareholders' equity of $12.32 billion as of September 30, 2019. Cash and cash equivalents were $1.95 billion. The company's liquidity is supported by cash from operations, existing credit lines, and strong investment-grade debt ratings, indicating the ability to meet short-term obligations and fund operations.