Stryker Corp.05.01.20
Stryker has reported operating results for the first quarter of 2020, and while the company still made a slight profit, its figures were not as high as anticipated.
According to the company, the response to the COVID-19 pandemic has included unprecedented measures to slow the spread of the virus taken by local governments and healthcare authorities globally, including the deferral of elective medical procedures and social contact restrictions, which have had a significant negative impact on Stryker’s operations and financial results.
First Quarter Results
"Our first quarter organic sales growth of 2.4 percent reflects strong momentum through much of the quarter before experiencing a significant negative impact from the COVID-19 pandemic," said Kevin Lobo, chairman and CEO. "We have taken a number of steps designed to ensure the safety of our employees and customers while continuing to meet the needs of hospitals and caregivers providing essential services. While the fluidity of the current environment makes it difficult to predict our financial performance for the remainder of 2020, given the strength of our balance sheet and cost containment efforts underway, we believe we are well positioned to manage through this unprecedented situation. And as patients who have deferred surgical procedures begin to return over the coming weeks and months, we will work with our customers to help meet the expected demand. On behalf of the Stryker leadership team, I would like to offer my thanks to our thousands of employees around the globe and to the caregivers and first responders for their tremendous efforts in dealing with this health crisis."
Consolidated net sales were significantly negatively impacted by the global response to the COVID-19 pandemic, resulting in lower than previously expected unit volume growth rates across all segments. Consolidated net sales of $3.6 billion increased 2 percent in the quarter and 2.9 percent in constant currency. Organic net sales increased 2.4 percent in the quarter including 2.8 percent from increased unit volume partially offset by 0.4 percent from lower prices.
Orthopaedics net sales of $1.2 billion decreased 2.1 percent in the quarter and 1.2 percent in constant currency. Organic net sales decreased 1.2 percent in the quarter including 1.5 percent from lower prices partially offset by 0.3 percent from increased unit volume.
MedSurg net sales of $1.6 billion increased 6.2 percent in the quarter and 7 percent in constant currency. Organic net sales increased 6.3 percent in the quarter including 6 percent from increased unit volume and 0.3 percent from higher prices.
Neurotechnology and Spine net sales of $0.7 billion increased 0.7 percent in the quarter and 1.5 percent in constant currency. Organic net sales increased 0.3 percent in the quarter from increased unit volume.
Earnings Analysis
Earnings were significantly negatively impacted by the global response to the COVID-19 pandemic. Reported net earnings of $493 million increased 19.7 percent in the quarter. Reported net earnings per diluted share of $1.30 increased 19.3 percent in the quarter. Reported gross profit margin and reported operating income margin were 65 percent and 17.7 percent in the quarter. Adjusted gross profit margin1 and adjusted operating income margin1 were 65.3 percent and 24 percent, a decline of 110 basis points in the quarter. Adjusted net earnings1 of $699 million decreased 2.1 percent in the quarter. Adjusted net earnings per diluted share1 of $1.84 decreased 2.1 percent in the quarter.
2020 Outlook
The global response to the COVID-19 pandemic has had, and we expect will continue to have, a significant negative impact on Stryker’s operations and financial results. While the company reported overall increased unit volume in the quarter, most of its businesses saw dramatic declines in March. Due to the uncertain scope and duration of the pandemic, and uncertain timing of global recovery and economic normalization, Stryker is unable to estimate the overall impacts on its operations and financial results, which could be material. Accordingly, the company will not be providing second quarter or full-year organic sales growth or earnings guidance for 2020.
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 and operating income margin, net earnings and net earnings per diluted share, and other important information accompanies this press release.
According to the company, the response to the COVID-19 pandemic has included unprecedented measures to slow the spread of the virus taken by local governments and healthcare authorities globally, including the deferral of elective medical procedures and social contact restrictions, which have had a significant negative impact on Stryker’s operations and financial results.
First Quarter Results
- Reported net sales increased 2 percent to $3.6 billion
- Organic net sales increased 2.4 percent
- Reported operating income margin of 17.7 percent
- Adjusted operating income margin1 contracted 110 bps to 24 percent
- Reported EPS (earnings per share) increased 19.3 percent to $1.30
- Adjusted EPS1 decreased 2.1 percent to $1.84
"Our first quarter organic sales growth of 2.4 percent reflects strong momentum through much of the quarter before experiencing a significant negative impact from the COVID-19 pandemic," said Kevin Lobo, chairman and CEO. "We have taken a number of steps designed to ensure the safety of our employees and customers while continuing to meet the needs of hospitals and caregivers providing essential services. While the fluidity of the current environment makes it difficult to predict our financial performance for the remainder of 2020, given the strength of our balance sheet and cost containment efforts underway, we believe we are well positioned to manage through this unprecedented situation. And as patients who have deferred surgical procedures begin to return over the coming weeks and months, we will work with our customers to help meet the expected demand. On behalf of the Stryker leadership team, I would like to offer my thanks to our thousands of employees around the globe and to the caregivers and first responders for their tremendous efforts in dealing with this health crisis."
Consolidated net sales were significantly negatively impacted by the global response to the COVID-19 pandemic, resulting in lower than previously expected unit volume growth rates across all segments. Consolidated net sales of $3.6 billion increased 2 percent in the quarter and 2.9 percent in constant currency. Organic net sales increased 2.4 percent in the quarter including 2.8 percent from increased unit volume partially offset by 0.4 percent from lower prices.
Orthopaedics net sales of $1.2 billion decreased 2.1 percent in the quarter and 1.2 percent in constant currency. Organic net sales decreased 1.2 percent in the quarter including 1.5 percent from lower prices partially offset by 0.3 percent from increased unit volume.
MedSurg net sales of $1.6 billion increased 6.2 percent in the quarter and 7 percent in constant currency. Organic net sales increased 6.3 percent in the quarter including 6 percent from increased unit volume and 0.3 percent from higher prices.
Neurotechnology and Spine net sales of $0.7 billion increased 0.7 percent in the quarter and 1.5 percent in constant currency. Organic net sales increased 0.3 percent in the quarter from increased unit volume.
Earnings Analysis
Earnings were significantly negatively impacted by the global response to the COVID-19 pandemic. Reported net earnings of $493 million increased 19.7 percent in the quarter. Reported net earnings per diluted share of $1.30 increased 19.3 percent in the quarter. Reported gross profit margin and reported operating income margin were 65 percent and 17.7 percent in the quarter. Adjusted gross profit margin1 and adjusted operating income margin1 were 65.3 percent and 24 percent, a decline of 110 basis points in the quarter. Adjusted net earnings1 of $699 million decreased 2.1 percent in the quarter. Adjusted net earnings per diluted share1 of $1.84 decreased 2.1 percent in the quarter.
2020 Outlook
The global response to the COVID-19 pandemic has had, and we expect will continue to have, a significant negative impact on Stryker’s operations and financial results. While the company reported overall increased unit volume in the quarter, most of its businesses saw dramatic declines in March. Due to the uncertain scope and duration of the pandemic, and uncertain timing of global recovery and economic normalization, Stryker is unable to estimate the overall impacts on its operations and financial results, which could be material. Accordingly, the company will not be providing second quarter or full-year organic sales growth or earnings guidance for 2020.
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 and operating income margin, net earnings and net earnings per diluted share, and other important information accompanies this press release.