A strong dollar relative to other currencies further eroded weak sales of surgical equipment, which fell 11 percent to $620 million worldwide during the three months ended June 30. Absent the negative impact of currency conversions, the drop was still 7.7 percent below the $696.1 million in global sales reported by the division during the June 2008 quarter.
Company officials said shipments of endoscopic, communications and digital imaging systems and patient handling and emergency medical equipment remain sluggish, overshadowing a modest rebound in recent months in sales of surgical equipment and surgical navigation systems.
Sales of orthopedic implants also were flat during the quarter, slipping about $2 million on a reported basis to $1.014 billion from the $1.016 billion reported last year. The strongest performance was shown in sales of implants used in hip, knee, trauma and spinal procedures. The orthopedic division includes Hopkinton’sStryker Biotech.
Overall, Stryker posted net income of $291.3 million, or 73 cents per share, on $1,634 billion in sales during the June quarter. That compares with a $305.8 million profit on $1,712.6 in sales during the same three months last year.
Second-quarter earnings topped consensus analyst projections by 2 cents. Looking forward, the company said it expects to earn between $2.90 to $3.10 a share during 2009, marking at least a 2 percent, or about $8 million, jump over 2008 levels.
“Clearly 2009 has thus far presented us with some considerable challenges, the magnitude of which turned out to be far greater than our expectations coming into the year,” Stryker CEO Steve MacMillan told analysts during a conference call Tuesday explaining the second-quarter results.
According to Katherine Owen, vice President for strategy and investor relations at Stryker, gross margins declined 170 basis points during the quarter compared to 2008, due to slowdowns at some of its manufacturing plants in response to declining sales. The company also trimmed research and development spending 9 percent during the quarter, she said, with expenditures largely limited to key product development initiatives.
Owen said the number of elective procedures again fell in certain U.S. markets, causing some pricing pressure on reconstructive procedures, but added she believes that the overall pace of decline is starting to stabilize.
There also are signs hospitals are slowly freeing up money for new capital equipment purchases, she said.
“Not surprisingly, hospital budgets continued to weigh heavily on (Stryker) results, more so than we and the company anticipated,” said Rick Wise, an analyst with Leerink Swann Research.
Wise also was less optimistic than company officials, writing he expects many of those challenges will continue throughout the rest of the year. Wise cut his earnings estimates for the full year at 3 cents to $2.97 a share and lowered his revenue estimate to between $6.6 billion to $7.2 billion, down about $100 million from his previous forecasts.