Stryker’s Tops Big Ortho at Mid-Year Mark

Among the large, integrated suppliers of musculoskeletal implants, biologics, navigation, and other intelligent systems, Stryker Corporation—for both systemic and execution reasons—came in at the top of its class at 2024’s six month mark.

Q2 sales, again we look at real sales of real products, ignoring currency fluctuations—aka “organic sales”—came in at $5.4 billion, up 9% from last year’s levels. Zimmer Biomet, by comparison, reported $1.9 billion up about 6% and JNJ’s DePuy Synthes reported $2.3 billion in Q2 organic sales, up 3%.

Adding in the first quarter sales report, Stryker’s sales for the first half of 2024 were $10.7 billion, up 9%.

Highlights and Lowlights

Stryker’s two best performing product categories were not specifically ortho—Instruments (retractors, scissors, graspers, gynecological instruments, dispensers, skin closure solutions, etc.), and neuro cranial (cranial fixation, aspirators, drills, guides, micro vacuums, etc.).

Instruments, Stryker’s 4th largest product category (out of 10) grew 12% to $698 million. Neuro cranial, Stryker’s 7th largest product category also increased 12% to $416 million.

Interestingly, while top-performing instruments and neuro-cranial put up strong numbers in the U.S.—both growing by double digits—it was actually OUS sales that pushed both product categories higher—15% year-over-year OUS growth for neuro cranial and 14% year-over-year OUS growth for instruments.

Lowlights were two of Stryker’s smallest product categories—spine (#9 rank) which grew a paltry 4% to $307 million and neurovascular (#8) which grew just 5% to $327 million.

How do you solve a problem like spine? Zimmer Biomet also struggled with spine and decided to take a corporate engineering approach, spinning it out as “ZimVie”—throwing in the towel, essentially.

Stryker’s spine solution? Tbd.

Stryker’s Systemic Advantage

One of the most enduring legends of Stryker CEO John Brown was that he managed to engineer—yes, engineer—a consistent 20% year-over-year earnings growth rate. He managed that piece of legerdemain by successfully deploying a Wall Street style of product portfolio management along with savvy bookkeeping practices.

In John Brown’s day, Stryker was a much smaller company, $10 million in annual sales when he became CEO in 1977 and $4.3 billion when he retired, turning the CEO position over to Stephan Macmillan in 2005.

Stryker is now 4x larger than when Brown retired so bookkeeping practices have evolved, but Brown’s decision to build a diverse platform of product categories—hospital capital equipment, basic tools and instruments for virtually all surgery, orthopedic specific products and, most recently, “intelligent” systems that can be applied across surgical specialties—gives Stryker a systemic market advantage to this day. And you can see it in the consistency of Stryker’s numbers.

Ortho Performance and Product Trends

Stryker’s sales of orthopedic and spine products and services grew 8.0% organically reaching $2.3 billion. Trauma and extremity sales (why, exactly, does SYK lump trauma in with extremity products? Arthrodesis = fracture repair?) led the category with 9% year-over-year growth and credit shoulder, biologics, and basic fracture repair products for the strong sales. Hip sales were another clear highlight, rising 10.6% year-over-year, credit, in part Stryker’s Insignia hip stem. Knee product sales rose 8% year-over-year and a key driver was Mako robotic knee procedures.

In the call with Wall Street’s analysts and investors, management noted:

• Orthopedic and spine surgery volumes were strong
• Order backlogs are up for endoscopy and medical product categories
• Mako continues to perform well—both in terms of new customers and existing customer utilization rates. Mako shoulder is coming later in 2024. And management announced Q Guidance for spine featuring Copilot.
• The M&A deal pipeline is strong. With $3 billion cash on hand and another $3 billion in annual operating cash flow, SYK can do deals. Notably (and another reason to make extremities a standalone category), Stryker acquired Artelon. Read “Could Artelon be the Next Treace?” to see why this is such a strategic move.

Finally, following management’s lead, Wall Street is raising both Stryker’s sales growth rate expectations for 2024 to 9-10%.