Stryker Corporation SYK reported fourth-quarter 2024 adjusted earnings per share (EPS) of $4.01, which beat the Zacks Consensus Estimate of $3.87 by 3.6%. The bottom line also improved 15.9% year over year. Our model estimate for the metric was $3.85 billion.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

GAAP EPS was $1.41, down 52.7% from the year-ago quarter’s level. The significant decline was due to recording of a goodwill and impairment charge related to SYK’s Spine business. The company has inked an agreement to divest the Spine implant unit yesterday.

Revenue Details

Revenues totaled $6.44 billion, which beat the Zacks Consensus Estimate by 1.3%. The top line also improved 10.7% on a year-over-year basis and 11.2% at constant currency (cc). Our model estimated total sales to be $6.33 billion.

Revenues by Geography

Revenues in the United States amounted to $4.87 billion, up 11.8% from the prior-year quarter’s level. International sales increased 7.2% year over year to $1.56 billion.

Segmental Analysis

Stryker recently signed an agreement to sell its U.S. spinal implants business to Viscogliosi Brothers, LLC, a family-owned investment firm specializing in the neuro-musculoskeletal space. The new company will be called VB Spine, LLC. Stryker also plans to sell related international business. The divestment is likely to be completed by the first half of 2025.

Effective in the fourth quarter, its Spine enabling technologies results are reported as part of other orthopedics. Interventional Spine results are reported as part of neurocrine. As a result, spinal implants are now reported separately within orthopedics.

MedSurg and Neurotechnology: This segment reported sales of $3.88 billion, up 10.6% year over year and 11.1% at cc. Our model estimated segment sales to be $3.75 billion.

In the quarter under review, MedSurg and Neurotechnology recorded organic sales growth of 10.1%, which included 11.5% of U.S. organic growth and 5.8% of international organic growth. Instruments recorded U.S. organic sales growth of 8.8%, led by healthy growth in both the Surgical Technologies and orthopedic implants businesses. From a product perspective, sales growth was led by smoke evacuation, waste management, power tools and SteriShield.

Stryker Corporation Price, Consensus and EPS Surprise

Stryker Corporation price-consensus-eps-surprise-chart | Stryker Corporation Quote

Endoscopy saw 12.9% U.S. organic growth, driven by strong demand for OR infrastructure, the 1788 video platform and sports medicine products. Medical grew 11.1%, led by emergency care and Sage. Key product drivers included beds, Sage products, transport capital, and defibrillators, contributing to overall strong sales performance across both segments.

Neurovascular grew 12% in the United States, driven by strong hemorrhagic sales and improved ischemic performance. Neurocranial saw 13.3% growth, led by strong demand for bone mills, high-speed drills, bipolar forceps, craniomaxillofacial and interventional spine products.

International sales were driven by growth in Instruments and Endoscopy businesses, especially strong performances in Canada and the United Kingdom.

Orthopedics: Sales in the segment amounted to $2.55 billion, up 10.8% year over year and 11.3% at cc. Organically, sales were up 10.2%, which included organic growth of 10% in the United States and 10.5% internationally. The knee business grew 8.5% organically, reflecting its market-leading position in robotic-assisted knee procedures and momentum from the continued strength of its new Mako installations. Our model estimated Orthopedics sales to be $2.57 billion.

U.S. hips grew 7.1%, driven by Cigna hip stem success and Mako robotic platform momentum. Trauma and Extremities surged 16.2%, led by strong core trauma and upper extremities growth. Spinal implants rose 2.3%, while Enabling Technologies boosted other ortho by 1.3%. International Orthopaedics grew 10.5%, with strength in emerging markets like Australia, New Zealand, Europe and Canada.

Margins

Adjusted gross profit totaled $4.2 billion in the reported quarter, up 13.2% from the year-ago quarter’s level. Adjusted gross margin expanded 140 basis points (bps) to 65.3%. The improvement was primarily driven by positive pricing, manufacturing cost improvements and mix.

Total operating expenses were $3.59 billion, up 46.9% from the year-ago quarter’s level.

Adjusted operating income totaled $1.88 billion, up 18.6% from the year-ago level. Adjusted operating margin was 29.2%, up 200 bps.

Financial Update

Stryker exited the fourth quarter with cash and cash equivalents of $3.65 billion compared with $4.68 billion at the end of the third quarter of 2024.

Cumulative net cash provided by operating activities totaled $4.24 billion compared with $3.71 billion a year ago.

2025 Guidance

Stryker issued its guidance for 2025. The company expects total revenues to grow in the range of 8-9% on an organic basis. The Zacks Consensus Estimate for total revenues is pegged at $22.51 billion, implying growth of 9.8%. Based on the steady progress of the company’s pricing actions, it expects pricing impact to be modestly favorable.

SYK expects adjusted EPS to be in the band of $13.45-$13.70. The Zacks Consensus Estimate for earnings is pegged at $13.52 per share.

If foreign exchange rates hold near current levels, the company anticipates approximately 1% unfavorable impact on full-year net sales and 10-15 cents on adjusted EPS.

Meanwhile, SYK is expected to close the acquisition of Inari Medical by the end of February. On a constant currency basis, Inari is likely to add approximately $590 million of sales in the 2025 stub period and have dilutive impacts on an adjusted operating income margin of 0-20 bps. The acquisition is expected to be accretive by 20-30 cents to the adjusted EPS.

Wrapping Up

Stryker exited fourth-quarter 2024 on a strong note, wherein earnings and revenues beat the Zacks Consensus Estimate. The company delivered a strong performance in the U.S. market, notably in Instruments, Medical, Endoscopy, Trauma and Extremities and Mako. Strong International sales also buoyed optimism. SYK expects the momentum in the international market to continue in 2025. However, sales outlook for 2025 fell short of estimates, likely leading to a 1.3% decline in SYK’s share price during after-market trading on Jan. 29.

The company’s shares have gained 16.7% in the past six months compared with the industry’s growth of 16.6%. The broader S&P 500 Index has increased 10.8% in the same time frame.

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Stryker is set to expand through strategic mergers and acquisitions in 2025. Earlier this month, the company signed an agreement to acquire Inari Medical for approximately $4.9 billion. The acquisition is likely to expand its portfolio and provide life-saving solutions to patients with peripheral vascular diseases. SYK recently tendered an offer for all outstanding shares of common stock of Inari Medical, scheduled to expire on Feb. 18.

In October, SYK completed the acquisition of Vertos Medical, which provides minimally invasive solutions for treating chronic lower back pain and enhances the company’s pain management portfolio.  In September, SYK acquired Care.ai, strengthening its healthcare, IT and wirelessly connected offerings. The company also acquired NICO Corporation, which enables minimally invasive surgery for tumor and intracerebral hemorrhage procedures. In August, SYK completed the acquisition of MOLLI Surgical Inc., a privately held company specializing in the development of wire-free soft tissue localization technology for breast-conserving surgery.

Moreover, divestment of the Spine implants business looks promising as SYK assessed a decrease in future product demand due to the competitive environment and an increase in the Spine reporting unit’s weighted average cost of capital

On its fourth-quarter earnings call, SYK stated that its commercialization of the Pangea Plating system is progressing well, with a full launch expected in the United States by the second half of 2025. SYK’s LIFEPAK 35 defibrillator and monitor witnessed a strong order book and sales started to ramp up.

SYK's direct-to-consumer campaign has resulted in strong growth of its installed base for Mako alongside continued increases in utilization. In the United States, SYK completed nearly two-thirds of knee and one-third of hip surgeries performed using Mako by the end of 2024. Globally, SYK exited the year with just over 45% of knee and approximately 20% of hip surgeries performed using Mako. SYK believes that significant opportunities remain as Mako adoption increases.

Additionally, improvement in hospitals’ capital expenditure is likely to boost top-line growth in 2025. The company entered 2025 with an elevated order book. Moreover, the expansion in operating margin is reassuring. However, stiff competition in the MedTech space is a concern.

Zacks rank & Stocks to Consider

Stryker currently carries a Zacks Rank #3 (Hold)

Some better-ranked stocks in the broader medical space are Penumbra PEN, Masimo MASI and Abbott Laboratories ABT.

Penumbra, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 37.5% for 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.

PEN’s earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 10.54%. The company is scheduled to release fourth-quarter results on Feb. 18.

PEN’s shares have gained 42.8% compared with the industry’s 3.9% growth in the past six months.

Masimo, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 11.8% for 2025.

MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 58.5% compared with the industry’s 3.9% growth year to date. The company is scheduled to release fourth-quarter results on Feb. 25.

Abbott, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 10% for 2025. It delivered a trailing four-quarter average earnings surprise of 1.64%. The company’s fourth-quarter earnings were in line with market expectations.

ABT’s shares have risen 9.8% in the past six months compared with the industry’s 11.1% growth.

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