STRYKER CORP Q1 FY2025 earnings call

• Kevin Lobo noted robust organic sales growth of 10.1%, double-digit growth in MedSurg & Neurotechnology and high-single-digit in orthopedics despite one less selling day and 10% comparable. U.S. performance was strong with double-digit growth in multiple businesses, and international markets had healthy growth. Adjusted EPS was $2.84, up 13.6%. Completed acquisition of Inari Medical, integration going well, and sold U.S. Spinal Implants business. Full-year organic sales growth guidance raised to 8.5%-9.5% and adjusted EPS to $13.20-$13.45. • Jason Beach highlighted healthy procedural volumes, strong capital product demand, Mako robotic systems driving interest with new launches and next-gen Mako 4. LIFEPAK 35 defibrillator had robust demand, Pangea plating system growing. Inari's performance strong, prior year acquisitions performed well. • Preston Wells discussed first quarter financial results: organic sales growth 10.1%, adjusted EPS $2.84 up 13.6%. Gross margin 65.5% favorable by 190 basis points. Adjusted operating margin 22.9% favorable by 100 basis points. Full-year organic sales growth guidance raised, adjusted EPS guidance reiterated, tariff impact estimated at $200 million, foreign exchange impact zero to $0.10, and international spinal implants results excluded from Q2.

In the first quarter, Stryker delivered robust organic sales growth of 10.1%. MedSurg & Neurotechnology had organic sales growth of 10.7%, with U.S. organic growth at 11.4% and international at 8.2%. Instruments saw U.S. organic sales growth of 10.4% led by surgical technologies. Endoscopy had U.S. organic growth of 11.1% from core endoscopy and sports medicine. Medical had U.S. organic growth of 12.6% driven by emergency care and Sage. Vascular had U.S. organic growth of 5.6% in hemorrhagic products. Neurocranial had U.S. organic growth of 13%. Orthopedics had organic sales growth of 9.3%, with U.S. growth at 9.5% and international at 8.8%. U.S. knee business grew 8.3% organically, hip business 7.6%, trauma and extremities 15.2%, while U.S. spinal implants were flat and U.S. other ortho declined 1.9%. Internationally, MedSurg & Neurotechnology had 8.2% organic sales growth, orthopedics 8.8% organic growth.

• Raised full-year organic sales growth guidance to 8.5%-9.5% from prior expectations. • Reiterated adjusted EPS guidance of $13.20-$13.45. • Estimated tariff impact in 2025 at approximately $200 million, expect to offset through sales momentum, manufacturing footprint leverage, disciplined spending, and foreign currency impacts. • Expect negative foreign exchange impact in range of zero to $0.10 if rates hold current levels. • Starting in Q2, operating results will no longer include international spinal implants business.

• Medical business had supply chain disruptions continuing through Q2. • Tariffs pose a $200 million impact in 2025, which could affect margins if not fully offset. • Potential regulatory or supply chain issues related to international product approvals and launches.

Q: Marcus Robert asked about tariffs and how to think about absorption and mitigation.

A: Preston Wells said $200 million tariff estimate is based on current effect, offsetting through sales momentum, pricing, supply chain optimization, and positive FX.

Q: Larry Biegelsen asked about gross and operating margin cadence.

A: Preston Wells said focus on 100 basis points op margin improvement, from both gross margin and OpEx, with tariffs offsetting some gross margin gains.

Q: Joanne Wuensch asked about CapEx and Inari.

A: Jason Beach said capital businesses growing strongly with no slowdown signs; Kevin Lobo said Inari integration going well, early performance strong.

Q: Ryan Zimmerman asked about OUS hip and Trauma and Extremities.

A: Kevin Lobo said OUS hip benefited from SERF acquisition, but organic growth strong; Trauma and Extremities driven by Pangea plating system and upper extremities growth.

Q: Vijay Kumar asked about tariff cadence and Medical LP 35 launch.

A: Preston Wells said tariff progression varies by business, LP 35 launch going well with strong orders and pending approvals.

Q: David Roman asked about pricing and Pangea rollout.

A: Preston Wells said pricing evolving positively, Pangea continuing to ramp with international launches planned.

Q: Philip Chickering asked about inventory days and Ortho other category.

A: Preston Wells said tariff impact varies by business, Ortho other category flat due to Mako deal mix and bone cement decline.

Q: Unidentified Analyst asked about M&A and Spine divestiture.

A: Preston Wells and Kevin Lobo said tuck-in acquisitions priority, Spine divestiture with VB Spine continuing partnership.

Q: Ravi asked about CapEx 2026 and Inari R&D.

A: Jason Beach said CapEx early 2026 outlook positive; Kevin Lobo said Inari products doing well with R&D improvements.

Q: Chris Pasquale asked about manufacturing footprint and FDA layoffs.

A: Preston Wells said no major manufacturing footprint changes; Kevin Lobo said FDA layoffs mostly reinstated.

Q: Patrick Wood asked about Shoulder and Endoscopy.

A: Kevin Lobo said Shoulder Mako launch positive, Endoscopy 1788 camera and sports med strong.

Q: Shagun Singh asked about international growth and margins.

A: Kevin Lobo said international growth significant catalyst, Jason Beach said long-term margin goals updated at Investor Day.

Q: Mike Matson asked about revenue guidance and Spine divestiture proceeds.

A: Preston Wells said currency impact on revenue guidance, divestiture proceeds part of financing.

Q: Caitlin Cronin asked about tuck-in acquisitions and Ortho ASP.

A: Jason Beach said ASC trend positive; Kevin Lobo said tuck-in acquisitions performing well.

Q: Danielle Antalffy asked about recession and capital equipment.

A: Kevin Lobo said no recession signs, capital equipment demand strong.

Q: Matt Taylor asked about tariffs and bottom line impact.

A: Preston Wells and Kevin Lobo said tariffs gone would boost bottom line through investment and margin expansion.