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Stryker Corporation (SYK)

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Stryker Corporation (SYK)

Bank of America Merrill Lynch 2019 Health Care Conference

May 14, 2019 1:40 PM ET

Company Participants

Glenn Boehnlein - Vice President and Chief Financial Officer

Katherine Owen - Vice President of Strategy & Investor Relations

Andy Pierce - Group President, MedSurg

Conference Call Participants

Robert Hopkins - Bank of America Merrill Lynch

Presentation

Question-and-Answer Session

Q - Robert Hopkins

Very happy to have Stryker here. I think everybody knows the folks on the podium, but just, Katherine Owen who runs Strategy; Andy Pierce who runs MedSurg, and of course, Glenn, the company's Chief Financial Officer. So we will just do all Q&A here if that's okay, unless you guys have something you want to start with, but I know you guys are under indexed in China, but I am starting every single session with the same exact question because it's so topical and given all the commentary this week. Glenn, if you wouldn't mind just giving us a quick thought on China tariffs this week and what you guys have said previously, and if there is any preliminary thoughts on some of the noise from this week? I am sure everybody would be interested.

Glenn Boehnlein

Yes, I think, first of all, it's kind of a good and a bad that we are a little undersized [technical difficulty]. Right, if you look at sort of the impact to us on tariffs, it's more outbound what we import, what we export from China. I think before we guided to you about $25 million, as we reassess the new round of tariffs, we think that it's maybe $3 million to $5 million more. So, we think that it will be covered within the existing guidance that we provided.

Robert Hopkins

Okay, that's great. Was there anything that stood out -- I mean I know it's very early. It's some of the stuff from this week that you saw from the MedTech perspective just broadly do you think we should be looking at?

Glenn Boehnlein

Yes. No, I don't think anything really sticks out. I think that MedTech has not been as big a target. I mean the flipside of this that we are probably still evaluating although I don't think it will be so big, would just be the inbound relative to what's imported into China and the new round of tariffs that China announced yesterday.

Robert Hopkins

Okay. So, I wanted to try to cover a couple of topics. One is the -- it's really the theme is sort of sustainability, wanted to talk about sustainability of growth in MedSurg, wanted to talk about sustainability of growth outside the United States. And then obviously want to talk about strategy in Mako. But before we do that, I am wondering if we could kind of reflect back a little bit on the last two quarters, because you guys gave some strong guidance at the start of the beginning of the year, took the stock up nicely and then had a very solid quarter and tweak the guidance up again. So, I'm just curious looking back, could you just talk about what drove those decisions to give the kind of guidance that you gave, sort of your philosophy around how you think about that and -- because it was a nice part of the surprise it has a big impact on the stock, so I think it's worthy of some discussion here before we get going on the business.

Katherine Owen

Yes, so maybe I will start because it really is a process we go through every quarter and certainly at year-end as we think about setting the targets for the year, because it's based on our budget, and we also want to make sure that it reflects what we truly think the organization can deliver, and you don’t want it so low that you're always blown by it, and then you lose credibility on that end, nor do you want to guide down. So, it's part based on analytics and part based on little bit of subjectivity around it. And clearly as we got towards the end of the fourth quarter, it was [technical difficulty] was a lot of tailwinds and in the quarter you say that product made the quarter for Stryker, but when you add up all those products, the totality of them are really what helps drive that organic growth towards our goal of being at the high-end of Med Tech. And so, as we look ahead to the 2019 calendar year, whether it was launching a new camera in endo, which is a big driver for them, neuro getting into new markets while having a backdrop of a market that continues to be very healthy, strong momentum with Mako, and I'm feeling really good about the momentum there, new hip cup offering and then you look across the other MedSurg businesses splitting the sales force in instruments, benefiting from a number of acquisitions we had done there, and really across the organization.

And so, the bread and butter of our deal activity tends to be these smaller deals, it's the NOVADAQ, it's the Pivot, it's the Entellus that are small in isolation, but when you layer those into our global sales and marketing infrastructure, and we are able to really put more resources behind it, they became a big driver of growth and so all of that layered along continued strong momentum in Europe seeing better results in emerging markets, we have put a lot of new talent in place over there, and it was all coming together. That said, we are in a really good position at the start of the year.

Read the rest of this transcript on seekingalpha.com