Stryker Q4 Profit Edges Up; Backs FY09 Forecast - Update

(RTTNews) - Orthopaedic Implants and MedSurg Equipment maker Stryker Corp. (SYK | Quote | Chart | News | PowerRating), Tuesday reported a slight improvement in fourth quarter profit, as revenues improved on the backdrop of Orthopaedic Implants and MedSurg Equipment sales. Profit for the quarter, however, was partially offset by a charge related to restructuring. Stryker maintained its full-year 2009 forecast, indicating a possible unfavorable impact on net sales, assuming foreign currency exchange rates to hold near current levels.

Stephen MacMillan, President and Chief Executive Officer, said, "Six of our eight major product franchises achieved double-digit sales growth in 2008 demonstrating the strength of our diversified business model."

Fourth quarter net income for Stryker improved 0.6% at $278 million, compared to $276 million reported in the prior-year quarter. On a per share basis, earnings, however, were up 4.5% to $0.69 from $0.66 in the year-ago quarter.

In the previous third quarter, the implant and surgical equipment maker recorded a 19.7% growth in net earnings to $273.8 million or $0.66 per share, on a 13.7% increase in net sales boosted by Orthopaedic Implants and MedSurg Equipment sales.

Earnings were negatively impacted by a $22 million restructuring charge related to decisions to simplify the structure of the company's Japanese distribution business and to substantially reduce development efforts associated with the 2006 acquisition of Sightline Technologies, Ltd.

Excluding charges, adjusted earnings from continuing operations was $299 million, up 8.4% over $276 million in the year-earlier quarter. On a per share basis, earnings rose 12.2% to $0.74 from $0.66 in the comparable quarter last year.

On average, twenty-one analyst polled by First Call/Thomson Financial expected earnings of $0.74 per share for the quarter. Analysts' estimate typically excludes one-time special items.

Amongst others in the industry, Zimmer Holdings Inc. (ZMH | Quote | Chart | News | PowerRating), reported a sharp rise in profit to $214.7 million or $0.95 per share, benefiting mainly from higher knee and reconstructive products sales and lower expenses. St. Jude Medical, Inc. (STJ | Quote | Chart | News | PowerRating) slid to a fourth quarter loss of $194.l46 million or $0.56 per share, hurt by charges.

Operating income for the quarter improved 2.0% to 370.3 million, while as a percentage of sales, operating margin was down at 21.6% from 21.9% recorded in the prior-year quarter.

Sales for the Kalamazoo, Michigan-based medical technology company were $1.72 billion, an increase of 3.6% from $1.66 billion in the corresponding quarter a year ago, in line with Street estimates of $1.72 billion. On a constant currency basis, net sales increased 7.7%.

Amongst other industry leaders, Zimmer Holdings reported a 5% rise in third quarter sales, while St. Paul, Minnesota-based St. Jude Medical reported sales that rose 11% to $1.13 billion from the year-ago quarter.

In the third quarter, Stryker that operates in two segments, Orthopaedic Implants and MedSurg Equipments, reported a 13.7% increase in sales to $1.65 billion.

For the quarter under review, worldwide sales of Orthopaedic Implants increased 4.2% and MedSurg Equipment sales increased 2.8%. On a constant currency basis, sales of Orthopaedic Implants rose 8.9%, while MedSurg Equipment sales was up 6.2%. Domestic sales for Stryker rose 7.0%, while International sales declined 2.3% from the prior-year quarter.

MacMillan said, "We are pleased to report our eighth consecutive year of double-digit sales growth for 2008 despite the slowdown in capital purchases by our hospital customers during the fourth quarter."

For full-year 2008, net earnings were $1.15 billion, up 12.8% from $1.02 billion a year ago. On a per share basis, earnings surged 13.9% to $2.78, compared to $2.44 last year.

Excluding charges, adjusted net earnings from continuing operations increased 17.0% to $1.17 billion, while earnings, on a per share basis, increased 17.9% to $2.83 over adjusted net earnings.

The Street anticipated the company to report earnings of $2.82 per share for the full year.

Full year sales for Stryker surged 12.0% to $6.72 billion from $6.00 billion in the prior year, surpassing analysts' estimates of $6.71 billion. On a constant currency basis, net sales increased 10.5% for the year.

Stryker continues to projects 2009 earnings in the range of $3.12 per share to $3.22 per share, an increase of 10% to 14% over adjusted net earnings per share from continuing operations of $2.83 in 2008. The Street currently anticipates earnings of $3.12 per share for the year.

Outlook for 2009 also anticipates a constant currency net sales increase in the range of 6% to 9%.

Stryker also anticipates recording an unfavorable impact on net sales of approximately 4.5% to 5.5% in the first quarter of 2009 and an unfavorable impact on net sales of approximately 3.5% to 4.5% for the full year of 2009, if foreign currency exchange rates hold near current levels.

On December 1, 2008, brokerage Credit Suisse, expecting a more challenging environment, opted to remain neutral but cautious while maintaining a price target of $36 per share. Credit Suisse expects full year 2009 earnings in the range of $3.08 to $3.06 per share, as it suspects all areas of MedSurg slowed with the communications/digital imaging and medical beds businesses being weakest. Credit Suisse believes earnings could be more challenged than Stryker anticipates given the hospital Capex environment and potential slowdown in elective procedures.

SYK closed Tuesday's regular trading at $41.05, up $1.49 or 3.77%, on a volume of 3.89 million shares. In after-hours trading, the stock further gained $0.25 or 0.61%, to trade at $41.30. In the past 52-week period, the stock traded in the range of $35.38 to $70.56, on a three-month average volume of 3.89 million shares.

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