Stryker Corporation
(SYK) reported results for the first quarter of fiscal 2010. Earnings per share were 80 cents, surpassing the Zacks Consensus Estimate of 78 cents and the year-ago earnings of 71 cents.
 
Sales
 
Total revenues in the first quarter increased 12.4% year over year to $1,799.1 million. Excluding a favorable foreign currency translation (FX), net sales increased 8.7% year over year. Growth was witnessed across both the business segments.
 
Orthopedic Implants sales increased 10.7% year over year to $1,076.9 million. Growth was led by strong demand for the company’s Hips, Knees, Trauma and Spine products.
 
MedSurg Equipment sales increased 15.0% year over year to $722.2 million. Growth can be attributed to higher sales of Surgical equipment and surgical navigation systems, Endoscopic and communications systems, and Patient handling and emergency medical equipment.
 
Geographically, the U.S. contributed 65% to total revenues and increased 12.6% year over year. International sales increased 11.9% year over year.
 
Margins
 
Gross margin in the first quarter declined 10 basis points (bps) year over year to 67.7% due to higher cost of sales. Research, development and engineering expenses as a percentage of sales were roughly flat year over year at 5.0%. Selling, general and administrative expenses as a percentage of sales declined 140 bps year over year to 37.1%.
 
Stryker’s cost-control initiatives helped increase operating and net margins by 110 bps and 30 bps year over year to 24.8% and 17.9%, respectively.
 
Balance Sheet & Cash Flow
 
Stryker ended the first quarter with cash, cash equivalents and marketable securities of $3,937.6 million, registering a sequential increase of 33%. The company had an outstanding debt of $996.2 million at the end of the first quarter. Stryker generated $274.8 million of cash from operations in the first quarter, compared to $272.4 million at the end of the year-ago quarter.

Outlook
 
Stryker maintains its sales and earnings per share guidance for fiscal 2010. For the year, net sales are expected to grow between 5% and 8% on a constant-currency basis. Earnings per share should be in the range of $3.20 to $3.30. Foreign currency is expected to favorably impact net sales by 1% to 2% in the second quarter and 0.5% to 1.5% in fiscal 2010 at current exchange rates.
 
Stryker is one of the world’s largest medical devices companies operating in the global orthopedic market. In the orthopedic space, Stryker competes with major players, like Zimmer Holdings Inc. (ZMH), CONMED Corporation (CNMD), Smith & Nephew (SNN), Johnson & Johnson/DePuy (JNJ) and Wright Medical Group, Inc. (WMGI).
 
Presently, we have a ‘Neutral’ recommendation on Stryker.

Read the full analyst report on “SYK”
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Read the full analyst report on “WMGI”
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