Stryker’s Solid Quarter – MAKO Cruising

Stryker Corporation’s orthopedics business grew by 5.8% on a constant currency basis, reaching $1.019 billion in the third quarter.

Knees and hips were up over 3%, while trauma and extremities climbed by 9.1%. Spine was slower, growing only 1.9%. Sales were impacted negatively by 5.5% due to impact of foreign currency. Net sales included a 7.7% increase in unit volume, partially offset by 2.2% lower pricing.

The Robots

The company sold 17 MAKO robotic systems during the third quarter and is preparing for a limited launch of its total knee application after gaining FDA approval in August. Those sales bring the year-to-date total to 41, in both existing and new competitive accounts. The company anticipates that the majority of the MAKO installed base will be updated with the total knee software and be fitted with the necessary hardware by the end of 2016.

Recon Market

Based on results from DePuy Synthes and Stryker (and estimates of others) Needham & Company analyst Mike Matson estimate that the recon market grew by 2% during the quarter versus 1% in the second quarter on a constant currency basis. He estimates that global knee growth was 2% and global hip growth was 2% in the third quarter. That means Stryker was taking some market share in hips and knees.

BMO Capital Market analyst Joanne Wuensch said orthopedics is a tale of two geographies this earnings season. In the U.S., Stryker sales were up 9% (despite facing tough comps), with trauma and extremities up 15% (including foot and ankle up nearly 20%); hips, up 5.7%; and knees, 5%.

The U.S. 6% spine growth slowed from the previous year, but management is happy with the business unit’s momentum. U.S. spine implants were up mid-single-digits driven by recent new product launches.

Outside the U.S., it was a different story, said Wuensch, as sales (on a constant currency basis) were up just 0.5%, trauma and extremities were up 1.5%; hips, down 0.4%; and knees, up 0.2%. Wuensch added that the foreign sales story was different for each large orthopedic company. “For Stryker, Europe ‘had a terrific quarter, ’ delivering mid-single-digit growth, but tougher macroeconomic issues in China and Brazil weighed on the segment.”

Stryker management maintained its 2015 organic sales growth guidance of +5.5% to +6.5%.

“We delivered another solid quarter with organic sales again exceeding 5%, ” said Kevin A. Lobo, chairman and CEO. “I am pleased with our disciplined execution as we work with our customers to make healthcare better.”