Weaker euro batters Stryker's Q2 earnings
On the surface, Stryker's ($SYK) 2012 second-quarter financial results came out just fine. The Michigan maker of hip and knee implants, surgical instruments, and other medical devices reported $2.1 billion in net sales, up 2.9% over the same period last year, driven by factors including higher unit volume, new product mixes, and acquisitions.
Net earnings for the company also grew steadily. They reached $325 million during the quarter, or 85 cents per share, up 4.8% over the 2011 second-quarter net earnings of $310 million, or 79 cents per share. But as Reuters points out, the company's earnings still fell short of what Wall Street predicted, thanks to a weakening euro that cut into the company's European sales by about 2 percentage points. Reuters reports that the news was enough to drive Stryker's share price down 2.5% in after hours trading Wednesday night.
Undaunted, Stryker's interim CEO (as well as vice president and CFO) Curt Hartman said in a statement that the company remains on track to deliver its stated goal of 2% to 5% growth. This, of course, excludes any impact from acquisitions, currency, and double-digit adjusted per share earnings growth.
Another hopeful note: Stryker may have faced weaker demand in Europe and to some degree, Japan. But officials said during a July 18 earnings call that improved sales of hip and knee implants in the U.S. helped offset the negative sales trends overseas, according to the Reuters story. Still, analysts were hoping to see better results. Aaron Vaughn, an analyst with Mid-Continent Capital, told Reuters that investors wanted to see more of an orthopedic implant rebound than Stryker's results reflected.
"Low-single-digit growth in the core businesses, in my eyes, is nothing to get excited about," Vaughn is quoted as saying in the Reuters piece.
Broken down, Stryker generated $927 million in reconstructive net sales, up 1.2% compared to the same period in 2011. MedSurg net sales grew 1.7%, reaching $786 million. Thanks, in part to acquisitions, neurotechnology, and spine product-related net sales jumped 10.1% over the previous year, hitting $393 million. The declining euro prevented that number from growing even larger, Stryker noted.
Among factors that impacted earnings: Stryker took a $33 million non-tax deductible charge during the quarter to settle a U.S. Department of Justice issue regarding the sales and marketing of its OtisKnee device.