Stryker (NYSE:SYK) said an unexpected, $170 million hit related to its recalled Rejuvenate hip implant pushed its 2nd-quarter profits down nearly 35% and lowered its earnings outlook for the rest of the year.
The Kalamazoo, Mich.-based medical device company posted profits of $213 million, or 56¢ per share, on sales of $2.21 billion during the 3 months ended June 30, for sales growth of 5.0% but a bottom-line slide of 34.5%.
Adjusted to exclude 1-time items like the recall costs, earnings per share were $1 even, coming in 3¢ under Wall Street’s forecast.
New CFO William Jellison said negative foreign exchange rates hit EPS for 4¢ and the medical device tax cost Stryker another 3¢.
"The most significant non-[generally accepted accounting principles] adjustments in the quarter, primarily related to a $170 million increase in the charge [were] associated with the voluntary recall of the Rejuvenate and ABG II modular hip stems. The adjustments also included an increase of $19 million for estimated settlement expectations for previously disclosed regulatory issues. We believe these are reasonable estimations of our exposure. However, no potential insurance offset that may be available to help cover some portion of the Rejuvenate recall has been included," Jellison said during a conference call with investors yesterday.
Stryker cut its earnings outlook for the rest of 2013, saying it now expects to log adjusted EPS of $4.20-$4.26, down from $4.25-$4.40. Full-year sales are forecast to grow between 4.0% and 5.5%, according to a press release.
SYK shares hit a 52-week high today, reaching $70.39 before subsiding to $69.98 apiece as of about 2:40 p.m.