) posted a nearly 1.0% rise in adjusted earnings per share to $1.08
in the second quarter of 2014 from $1.07 in the prior-year quarter
but missed the Zacks Consensus Estimate by a penny. Adjusted net
earnings rose modestly by 2.2% to $415 million from $406 million in
the second quarter of 2013.
The adjustments include charges for the recall of Rejuvenate, ABG
II and Neptune, acquisition and integration related charges,
additional cost of sales for inventory sold that was "stepped up"
to fair value related to acquisitions, restructuring and related
charges, certain charges related to regulatory and legal matters,
and amortization of intangible assets.
Stryker's reported net earnings for the quarter went up roughly
1.0% to $215 million from $213 million in the year-ago quarter.
However, reported net earnings per share were flat at 56 cents for
the quarter on a year-over-year basis.
Stryker Corporation - Quarterly EPS (BNRI) |
Stryker's second-quarter revenues escalated 6.8% year over year to
$2,363 million and edged past the Zacks Consensus Estimate of
$2,349 million. Volume and mix contributed 6.8% to revenue growth
and acquisition contributed 2.1%. These were partly neutralized by
unfavorable pricing impact of 2.0%.
On an organic basis (excluding the impact of acquisitions), net
revenues grew 5.0% in the quarter. Revenues from the U.S. improved
7.6% to $1,569 million while that from the international market
grew 5.4% to $794 million.
Revenues from Stryker's core
segment increased 6.5% (6.3% in constant currency) to $1,028
million in the reported quarter driven by solid growth in the
Trauma and Extremities business. Volume and product mix contributed
6.5%, acquisition contributed 2.8%, and favorable foreign currency
contributed 0.1% to revenue growth. Excluding the impacts of
acquisitions and currency, revenues grew 3.6%.
Revenues from Stryker's
segment increased 8.8% (9.0% in constant currency) to $905 million,
boosted by strong growth in Endoscopy business. Volume and product
mix contributed 7.8% to revenue growth. However, acquisition and
foreign currency had adverse impacts of 1.1% and 0.2%, respectively
on revenue growth. Excluding the impacts of acquisitions and
currency, revenues grew 6.7%.
Revenues from Stryker's
Neurotechnology and Spine
segment rose 3.8% (3.9% in constant currency) to $430 million,
driven by Neurotechnology sales. Volume and product mix contributed
5.5% and acquisition contributed 0.2% to revenue growth. However,
pricing and foreign currency had unfavorable impacts of 1.9% and
0.1% on revenues. Excluding the impacts of acquisitions and
currency, revenues grew 3.7%.
Adjusted gross profit in the second quarter grew 4.5% to $1,564
million. However, adjusted gross margin contracted 150 basis points
(bps) to 66.2% from 67.7% in the prior-year quarter. Adjusted
operating income increased 2.4% to $565 million but adjusted
operating margin decreased 110 bps to 23.9% from 25.0% in the
second quarter of 2013.
Stryker ended the quarter with cash and cash equivalents of $1,319
million, down 1.5% from $1,339 million as of Dec 31, 2013.
Long-term debt (excluding current portion) increased 18.2% to
$3,237 million as of Jun 30, 2014 from $2,739 million as of Dec 31,
Stryker generated cash flow of $572 million from operations during
the first half of the year, down 3.4% from $592 million in the same
period of 2013 due to a fall in net earnings. Capital expenditures
in the quarter rose 29.2% to $124 million from $96 million in the
same period last year.
Stryker updated its guidance for the full year 2014. The company
expects organic revenue growth in the range of 5.0 to 6.0% compared
with the earlier range of 4.5 to 6.0%.
Stryker now expects adjusted earnings per share in the range of
$4.75 to $4.80 for the full year compared with the earlier band of
$4.75 to $4.90. The current Zacks Consensus Estimate of $4.80 lies
within the guided range.
For the third quarter of the year, Stryker projected adjusted
earnings per share between $1.12 and $1.16 compared with the Zacks
Consensus Estimate of $1.16.
Stryker continues to grow through acquisitions. In Dec last year,
Stryker completed its acquisition of MAKO Surgical to get hold of
the latter's advanced robotic arm technology known as Robotic Arm
Interactive Orthopedic System ("RIO"). The acquisition helped
Stryker gain competitive edge in the hip-and-knee replacement
In March this year, Stryker completed acquisitions of Irvine,
CA-based Patient Safety Technologies and Sunnyvale, CA-based
developer of hip arthroscopy products, Pivot Medical, Inc.
Pivot's offerings are expected to complement Stryker's existing
Sports Medicine portfolio and will provide Stryker's customers with
more comprehensive solutions to address certain challenges faced
during current Sports Medicine procedures.
Thereafter, in April, Stryker closed the Berchtold acquisition,
which is expected to boost Stryker's fast growing endoscopy
division and operating room equipment product portfolio by adding
However, Stryker faces strong competition from
Johnson & Johnson
). It also faces obstacles for becoming a major medtech company
from a couple of recent M&A activities. They include the merger
), and between
Zimmer Holdings, Inc.
) and privately-owned Biomet, Inc.
Currently, Stryker carries a Zacks Rank #3 (Hold).
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