Stryker (NYSE:SYK) just missed Wall Street’s expectations with its 3rd-quarter earnings and reduced its forecast for 2012 and 2013 today, sending shares down a tad in after-hours trading.
The Kalamazoo, Mich.-based medical device company cited "weaker results from key countries outside the U.S." and softer sales for its capital equipment business.
Stryker pared its profit growth forecast for 2012 from 10% to 9% and narrowed its sales guidance for both years. The company said it expects constant-currency sales growth of 4% to 5.5% this year, compared with prior guidance of 3.5%-6.5%.
Adjusted earnings per share are now predicted to be between $4.04 and $4.07 for 2012 and $4.25 and $4.40 next year.
Stryker reported profits of $353 million, or 92¢ per share, on sales of $2.05 billion during the 3 months ended Sept. 30, for bottom-line growth of 8.0% and a meager top-line addition of 1.0%, compared with the same period last year.
Newly minted CEO Kevin Lobo blamed tough conditions in Japan and Europe, along with worldwide sluggishness in capital expenditures.
"Last quarter, we talked about challenges in Europe and Japan. Those challenges continued in the third quarter. And we’re seeing capital slowdowns occurring really, all over the world," Lobo told analysts on a conference call after the market’s close today. "We normally see September as a month where the sales will pick up. Even in Medical here in the U.S., we didn’t see the kind of pickup we were anticipating. And certainly, in Europe, the normal pickup that we would have, that we had factored into our projections did not materialize. And so we’re now assuming that this is a new normal, at least for the next little while. And that’s the reason for our adjustment to the guidance for both 2012 and 2013."
Stryker’s U.S. sales increased 4.7% during the 3 months ended Sept. 30, 2012, but international sales slid 5.6%, which the company attributed partially to "the unfavorable impact of foreign currency exchange rates on net sales."
On a constant currency basis international sales dropped only 0.4%.
Revenues increased for Stryker’s MedSurg and neurotechnology/spine divisions, but dropped 1.1% for its reconstructive business, which includes hips, knees and the trauma/extremities units.
Difficulties outside the U.S. took a toll nearly all of Stryker’s main units, with the exception of its endoscopy and medical businesses. Among the hardest hit internationally were trauma/extremities, which lost 10.6%, hips, which lost 9.6%, and spine, which lost 9%.
SYK shares dipped 1.2% to $52.82 in after-hours trading tonight.
Asked about his plans now that he’s at the helm, Lobo advised against looking for any "major shifts" in strategy.
"We need to be much more aggressive in certain areas such as the European turnaround," Lobo said. "And you can rest assured that focus on international is something that we will continue to drive, particularly in the emerging markets. … So I would say the strategy’s going to continue to evolve, but I would not be expecting any major shifts in our strategy."
Stryker also revealed today a $1.5 million "separation payment" for ex-CFO Curt Hartman, part of an exit package that includes base pay of $750,000, pro-rated through his Feb. 28, 2013, transition period. Hartman is also eligible for a 100% bonus "in respect of his services during 2012" and "a bonus equal to ⅙ of his 2012 target bonus," according to a regulatory filing.
