Stryker (NYSE:SYK) executives see hip and knee procedures growing in 2021, based on a trend that started in March and continued in April.
Such elective procedures were still sluggish in early 2021 due to the pandemic. Still, regional recovery from COVID-19 — particularly in the U.S. and Asia — bodes well for the company, CEO Kevin Lobo told analysts on the company’s first-quarter 2021 earnings call.
Stryker posted strong international sales of medical/surgical and sports medicine equipment compared with 2019, which Stryker execs chose for comparison purposes rather than 2020. The company also had double-digit organic growth (12.8%) in its interventional spine and neurotech businesses.
Sales of Stryker’s Mako robotic systems had a “banner” first quarter, Lobo said on the call, transcribed by Seeking Alpha, following similar positive results in Q4 2020. Mako sales lifted “other ortho” U.S. sales by 49% in the U.S. Stryker has not shared its Mako sales number for several quarters. Still, Lobo said he is hopeful, given the 4,500 hospitals that could use a Mako robotic system, and some even more than one.
“It was really Mako around the world that was booming in the first quarter, and that gives us a lot of optimism because that’s an early indicator of future implants growth,” Lobo said.
Stryker’s orders for large- and small-capital equipment are both picking up, the CEO added, contributing to its confidence in its full-year outlook. Neurovascular sales also did well in Q1, following a strong fourth quarter.
Stryker expects adjusted net earnings per diluted share to be in the range of $9.05 to $9.30 in 2021, up from the previous guidance of $8.80 to $9.20. The company still expects 2021 organic net sales growth to be in the range of 8% to 10% from 2019.
The integration of Wright Medical, acquired for $4.7 billion in November 2020, continues apace, added Stryker CFO Glenn Boehnlein.
The Kalamazoo, Mich.–based orthopedic device giant late yesterday reported profits of $302 million, or $0.79 per share, on sales of $3.953 billion for the three months ended March 31, 2021, for a bottom-line decline of –38.7 % on sales growth of 10.2% compared with Q1 2020.
Adjusted to exclude one-time items, earnings per share were $1.93, 6¢ behind The Street, where analysts were looking for EPS of $1.99 on sales of $3.96 billion.
Stryker faces several headwinds through the remainder of the year that may result in a “relatively noisy 2021” according to analysts at Truist Securities.
“Beyond potential integration issues with Wright, we think competition in robotics may intensify, and MedSurg comps ahead will become more difficult,” they wrote. “While we think the company has proven an ability to execute historically, we continue to see more attractive investment opportunities in large-cap medtech at this time.”
SVB Leerink analyst Richard Newitter was more positive about Stryker.
“Over the next two years, we view SYK as one of the best-positioned companies in our large-cap universe to sustain ‘upper-tier’ organic sales/EBITDA/EPS growth and to drive shareholder returns,” Newitter wrote in a note to investors. He cited these reasons for the outlook:
- New product cycles across divisions should help support divisional sales growth at or above rates for key end-markets.
- Growing exposure/market share within several faster-growing medtech subsectors (i.e., extremities, neurovascular, reprocessing, robotics).
- Increasing growth contributions from the Sage, Physio-Control, Invuity, K2M acquisitions, and eventually Wright Medical.
- Longer-term potential to generate significant incremental revenues from the MAKO platform in spine & extremities.
“As investors increasingly focus on these sales growth factors and operating leverage opportunities into the future, we believe the stock can move higher,” Newitter said.
