Coronavirus Curse: Stryker’s Second-Quarter Net Sales Tumble 24 Percent

Stryker Corp.’s second-quarter earnings were abysmal, thanks to COVID-19. 

The response to the COVID-19 pandemic has included unprecedented measures to slow the spread of the virus taken by local governments and health care authorities globally, including the postponement of deferrable medical procedures and social contact restrictions, which have had a significant negative impact on Stryker’s operations and financial results.
 
“Our second quarter results were negatively impacted by COVID-19, but I am pleased with the resiliency and creativity that our team displayed in supporting our customers and continuing to advance our new product pipelines,” said Kevin A. Lobo, chairman and CEO. “We were encouraged to see increased sales momentum through the quarter and into July and are poised to capitalize on the broader resumption of deferrable surgeries.”  
 
Consolidated net sales were significantly negatively impacted by the global response to the COVID-19 pandemic, resulting in lower unit volume across all segments. Consolidated net sales of $2.8 billion decreased 24.3 percent in the quarter and 23.5 percent in constant currency. Organic net sales decreased 24 percent in the quarter including 23.8 percent from decreased unit volume and 0.2 percent from lower prices.
 
Orthopaedics net sales of $0.9 billion decreased 29.9 percent in the quarter and 29.3 percent in constant currency. Organic net sales decreased 29.3 percent in the quarter including 28.1 percent from decreased unit volume and 1.2 percent from lower prices.
 
MedSurg net sales of $1.3 billion decreased 17.3 percent in the quarter and 16.4 percent in constant currency. Organic net sales decreased 17 percent in the quarter including 17.2 percent from decreased unit volume partially offset by 0.2 percent from higher prices.
 
Neurotechnology and Spine net sales of $0.5 billion decreased 29.6 percent in the quarter and 28.9 percent in constant currency. Organic net sales decreased 29.9 percent in the quarter including 30.4 percent from decreased unit volume partially offset by 0.5 percent from higher prices.
 
Earnings were significantly negatively impacted by the global response to the COVID-19 pandemic. Reported net earnings (loss) of ($83) million decreased 117.3 percent in the quarter, including $170 million of charges related to certain in-process asset impairments and product line and other exit costs resulting from our decision to suspend certain investments due to pandemic-related constraints. Reported net earnings (loss) per diluted share of ($0.22) decreased 117.5 percent in the quarter. Reported gross profit margin and reported operating income (loss) margin were 56 percent and (0.7 percent) in the quarter. Adjusted gross profit margin¹ and adjusted operating income margin¹ were 57.3 percent and 12.5 percent. Adjusted net earnings¹ of $245 million decreased 67.4 percent in the quarter. Adjusted net earnings per diluted share¹ of $0.64 decreased 67.7 percent in the quarter.
 
The global response to the COVID-19 pandemic has had, and the company expects will continue to have, a significant negative impact on Stryker’s operations and financial results. While Stryker reported overall decreased unit volume in the quarter, most of its businesses saw gradual recoveries in the month of June 2020. Due to the uncertain scope and duration of the pandemic, and uncertain timing of global recovery and economic normalization, the company is unable to estimate the overall impacts on operations and financial results, which could be material. Accordingly, the company will not be providing third quarter or full-year organic sales growth or earnings guidance for 2020.

Reference 
¹ A reconciliation of the non-GAAP financial measures: adjusted gross profit margin, adjusted operating income and adjusted operating income margin, adjusted net earnings and adjusted net earnings per diluted share, to the most directly comparable GAAP measures: gross profit margin, operating income (loss) and operating income (loss) margin, net earnings (loss) and net earnings (loss) per diluted share, and other important information accompanies this press release.