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    SYK
    Earnings call· Mar 2025(Q1 FY25)

    STRYKER Q1 FY25 earnings call SYK

    May 1, 2025 Source

    Executive summary

    Stryker Q1 FY25 — Robust Organic Sales Growth and Raised Full-Year Outlook

    Stryker delivered a strong Q1 FY25, marked by robust organic sales growth and significant margin expansion, leading to a raised full-year sales outlook. The company successfully integrated the Inari Medical acquisition and divested its U.S. Spinal Implants business, while actively managing the estimated $200 million tariff impact through various mitigation strategies. Momentum from Mako installations and new product launches is expected to drive continued performance, despite some supply chain challenges in the Medical segment.

    Highlights

    5

    • Robust organic sales growth of 10.1% in Q1 FY25, despite one less selling day.

    • Adjusted EPS of $2.84, up 13.6% compared to Q1 FY24, driven by strong sales and margin expansion.

    • Full-year organic sales growth guidance raised to 8.5% to 9.5%.

    • Full-year adjusted EPS guidance reiterated at $13.20 to $13.45, absorbing Inari dilution and tariff impact.

    • Adjusted gross margin improved by 190 basis points to 65.5% compared to Q1 FY24.

    Concerns

    4

    • Medical business experienced supply disruptions that will linger through Q2 FY25.

    • Tariff impact estimated at approximately $200 million in FY25, requiring significant mitigation efforts.

    • Inari acquisition and loss of Spinal Implant contributions for 9 months will dilute adjusted EPS.

    • Adjusted other income and expense increased by $24 million due to higher interest expense from recent debt issuances.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year 2025 organic sales growth
    8.5% to 9.5%
    high materiality
    High
    Full-year 2025 adjusted EPS
    $13.20 to $13.45
    high materiality
    High
    Full-year 2025 adjusted other income and expense
    approximately $430 million
    medium materiality
    High
    Full-year 2025 adjusted effective tax rate
    15% to 16%
    medium materiality
    High
    Full-year 2025 foreign exchange impact on sales
    slightly unfavorable
    low materiality
    Medium
    Full-year 2025 foreign exchange impact on adjusted EPS
    negative $0 to $0.10
    medium materiality
    High

    Segment performance

    13
    SegmentRevenueYoYQoQMargin
    MedSurg and Neurotechnology
    Growth led by Neuro Cranial, Endoscopy, and Instruments businesses internationally, despite supply disruptions in Medical business. Strong performances in Australia, New Zealand, Europe, and emerging markets.
    U.S. organic growth: 11.4%International organic growth: 8.2%
    		—10.7%——
    MedSurg and Neurotechnology - U.S.
    Strong performance across Instruments, Endoscopy, Medical, Vascular, and Neuro Cranial.
    		—11.4%——
    Instruments - U.S.
    Led by robust double-digit performance in Surgical Technologies.
    Surgical Technologies business: double-digit performance
    		—10.4%——
    Endoscopy - U.S.
    Led by double-digit performances in core Endoscopy and Sports Medicine portfolios.
    Core Endoscopy: double-digit performanceSports Medicine portfolios: double-digit performance
    		—11.1%——
    Medical - U.S.
    Driven by double-digit performances in emergency care and Sage businesses, with LIFEPAK 35 contributing significantly.
    Emergency care: double-digit performanceSage businesses: double-digit performance
    		—12.6%——
    Vascular - U.S.
    Reflecting solid performance in hemorrhagic products; organic sales do not include Inari.
    Hemorrhagic products: solid performance
    		—5.6%——
    Neuro Cranial - U.S.
    Led by strong double-digit growth in Neurosurgical, ENT, and Craniomaxillofacial businesses.
    Neurosurgical: strong double-digit growthENT: strong double-digit growthCraniomaxillofacial: strong double-digit growth
    		—13%——
    Orthopaedics
    Strong performance driven by Mako, cementless knees, and Insignia Hip Stem.
    U.S. organic growth: 9.5%International organic growth: 8.8%
    		—9.3%——
    Knee - U.S.
    Fueled by market-leading position in robotic-assisted knee procedures and continued momentum from new Mako installations.
    Robotic-assisted knee procedures: market-leading positionMako installations: continued momentum
    		—8.3%——
    Hip - U.S.
    Reflecting ongoing success of Insignia Hip Stem and continued adoption of Mako robotic hip platform.
    Insignia Hip Stem: ongoing successMako robotic hip platform: continued adoption
    		—7.6%——
    Trauma and Extremities - U.S.
    Very strong double-digit sales growth in core trauma and upper extremities businesses, led by Pangea.
    Core trauma: very strong double-digit sales growthUpper extremities: very strong double-digit sales growthPangea: differentiated plating portfolio
    		—15.2%——
    Spinal Implants - U.S.
    Organic growth was flat in the quarter.
    		—flat——
    Other Ortho - U.S.
    Against a strong comparable of 28% in Q1 FY24. Primarily driven by Mako deal mix away from direct purchases and a decline in bone cement.
    		—-1.9%——

    Operational metrics

    40
    Organic sales growth
    10.1%vs 10% in Q1 FY24
    Q1 FY25

    Robust growth despite one less selling day and a high comparable from the prior year.

    Adjusted EPS growth
    13.6%vs Q1 FY24
    Q1 FY25

    Driven by strong sales performance and margin expansion.

    Adjusted gross margin
    65.5%favorable by 190 bps vs Q1 FY24
    Q1 FY25

    Significant improvement primarily driven by cost efficiencies, pricing, and favorable business mix.

    Adjusted operating margin
    22.9%100 bps favorable vs Q1 FY24
    Q1 FY25

    Improvement driven by gross margin expansion, partially offset by increased SG&A due to Inari and other growth investments.

    Adjusted other income and expense
    $73 million$24 million higher vs Q1 FY24
    Q1 FY25

    Increased due to debt financing for the Inari acquisition.

    Adjusted effective tax rate
    13.7%
    Q1 FY25

    Reflecting the impact of geographic mix and discrete tax items.

    Organic sales growth - U.S.
    10.7%
    Q1 FY25

    Strong performance across multiple businesses.

    Organic sales growth - International
    8.5%
    Q1 FY25

    Strong sales momentum in Australia, New Zealand, Japan, and Europe.

    Foreign currency impact on sales
    0.9%unfavorable
    Q1 FY25

    Unfavorable impact on sales.

    Foreign currency impact on adjusted EPS
    $0.03unfavorable
    Q1 FY25

    Unfavorable impact on adjusted EPS.

    Mako installations
    Best-ever Q1
    Q1 FY25

    Driving continued growth in Hips and Knees businesses.

    Mako utilization rates
    high
    Q1 FY25

    Sustained momentum from installations and utilization.

    LIFEPAK 35 demand
    robust
    Q1 FY25

    Fueling strong order book and driving meaningful sales.

    Pangea plating system performance
    strong growth
    Q1 FY25

    Driving strong growth and increased awareness of trauma products; described as a 'wild success'.

    Inari performance
    strongas expected
    Q1 FY25 (partial)

    Acquisition completed end of February; results reported within vascular division.

    Prior year acquisitions performance
    performed wellas anticipated
    Q1 FY25

    All 7 tuck-in deals closed last year are on or ahead of model, with Artelon and Vertos particularly strong.

    SG&A spending increase drivers
    —vs Q1 FY24
    Q1 FY25

    Driven by the Inari deal and other investments to support growth.

    Tariff impact
    $200 million
    FY25

    Estimated impact for the full year, with mitigation efforts planned.

    Spinal Implants business (International) exclusion
    —
    Q2 FY25 onwards

    Operating results will no longer include the international Spinal Implants business as part of the sale agreement, starting in Q2.

    Mako Spine full U.S. commercial launch
    on track
    H2 FY25

    Positive feedback received.

    Mako Shoulder full U.S. commercial launch
    on track
    Q1 FY26

    Positive feedback received.

    Cementless knees survivorship
    exceeding 99%
    10-year

    Two publications showed strong 10-year survivorship for cementless offering.

    Inari international sales percentage
    7%
    Current

    Highlights massive international opportunity for Inari's products.

    Neurovascular business international sales
    moreoutside U.S.
    Current

    More sales outside the U.S. than in, indicating international strength.

    Capital equipment order book
    elevatedas high as it's ever been
    Q1 FY25

    No signs of slowdown or inertia in hospitals.

    Capital equipment revenue mix
    10%
    Current

    Represents a smaller portion of overall capital revenue.

    Capital equipment revenue mix
    15%
    Current

    Closely tied to procedures and needs replacement due to wear and tear.

    Shoulder product portfolio - Perform system
    —
    Current

    Contributes to strong growth in the Shoulder business.

    Shoulder product portfolio - Fracture stem, reverse stemless
    —
    Last 18-24 months

    Contributes to strong growth in the Shoulder business.

    Shoulder product portfolio - Shoulder iD
    —
    Current

    Helps with the most difficult part of the procedure, perfectly designed to match patient anatomy.

    Shoulder product portfolio - Pyrocarbon
    —
    Current

    On market outside U.S. for about a decade, approved in U.S. about a year ago.

    Shoulder product portfolio - Blueprint software
    —
    Current

    Contributes to the success of the Shoulder business.

    Endoscopy camera - 1788
    —
    Current

    Continues to win with customers and is an engine of very high growth.

    Sports Medicine growth
    strong double-digit grower
    Q1 FY25

    Driven by new shoulder products, mostly organically driven.

    Sports Medicine product - AlphaVent Knotless
    —
    Current

    One of 5-6 shoulder products launched in the last year.

    Defibrillator installed base (prior generation)
    over 100,000
    Current

    Represents a long-term tailwind for LIFEPAK 35 replacements.

    Mako 4 SmartRobotics system features
    —
    Recently launched

    Next-generation system enhancing Mako momentum.

    Inari product - Artix
    —
    Recently launched

    Getting favorable customer response and expected to contribute to future growth.

    Endoscopy light - Oculan
    —
    Just launched

    Expected to be a big contributor in future quarters, with strong orders in Communications business unit.

    FDA resources
    —
    Recent

    No major slowdowns anticipated due to FDA layoffs, as resources were largely restored.

    Industry KPIs

    12
    MetricValueDetails
    Tariff impact$200 millionUSD
    System utilizationhigh
    Pricing realized price0.7%%
    New product launch ramprobust demand
    Procedure volume growthhealthy
    FCF conversion leverage guidance—
    Installed base system placementsBest-ever Q1
    Segment franchise organic growth10.1%%
    Consumables recurring revenue mix—
    Sales force commercial capacity build—
    Indicated addressable patient population—
    Pivotal trial clinical evidence milestonesexceeding 99%%

    Product announcements

    5
    ProductTypeDetails
    Mako 4 SmartRobotics systemlaunch
    LIFEPAK 35 defibrillator and monitorexpansion
    Pangea plating systemexpansion
    Artixlaunch
    Oculan lightlaunch

    Deals & partnerships

    5
    Inari MedicalAcquisition of a medical device company specializing in venous disease.

    Completed at the end of February. Integration is going well, and performance has been strong. Tim Lanier is now President of Inari.

    VB SpineSale of U.S. Spinal Implants business.

    Completed during the quarter. Former Spine team members transferred to VB Spine. Stryker will continue to work with VB Spine on Mako Spine through an exclusive arrangement.

    SERFAcquisition of a company with hip products.

    Acquisition contributed to international Hip business growth. Some products now launched in the U.S.

    ArtelonTuck-in acquisition.

    One of the 7 tuck-in deals closed last year, noted for a very fast start.

    VertosTuck-in acquisition.

    One of the 7 tuck-in deals closed last year, noted for a very fast start.

    Risks & headwinds

    5
    Supply disruptions in Medical businessContinued through Q1 FY25, will linger through Q2 FY25.

    Affected international growth in MedSurg and Neurotechnology, and some U.S. business.

    Mitigation: Factored into guidance; other businesses performing strongly to offset.

    Tariff impactFY25, more back-half loaded.

    Approximately $200 million in FY25.

    Mitigation: Sales momentum, pricing initiatives, disciplined spending, supply chain optimization (dual sourcing), positive FX momentum.

    Dilution from Inari acquisitionFY25

    $0.20 to $0.30 of adjusted EPS dilution (pre-integration).

    Mitigation: Integrated into reiterated adjusted EPS guidance; strong performance expected from Inari.

    Loss of Spinal Implant contributionsFY25 (starting Q2 FY25 for international business).

    Loss of contributions for 9 months.

    Mitigation: Factored into guidance; continued partnership with VB Spine for Mako Spine.

    Higher interest expenseFY25

    $24 million higher in Q1 FY25 for adjusted other income and expense; full-year guidance of $430 million.

    Mitigation: Partially offset by interest income from higher invested cash; managed within overall financing strategy.

    What to watch in Q2 FY25

    5

    Medical business supply disruptions

    Q2 FY25
    CurrentLingering through Q2 FY25
    TargetResolution or clear path to resolution

    Why it matters

    Impacts MedSurg and Neurotechnology segment growth, particularly internationally, and could affect overall top-line performance if prolonged.

    We did mention in our prepared remarks that Medical is having some supply chain disruption🌐s. That will continue through Q2, but that is factored in our guidance.

    Q&A highlights

    5

    How will Stryker absorb the $200 million tariff impact, what are the mitigation strategies, and what is the expected exit rate into next year?

    Management confirmed the $200 million estimate is based on current tariffs, excluding paused items. Mitigation includes sales momentum, pricing, discretionary spending control, supply chain optimization (dual sourcing), and positive FX. Tariffs will hit COGS, while mitigations will occur across the P&L. The largest run-rate impact is expected by Q4 FY25, and 2026 is too dynamic to predict.

    “The $200 million is what we're currently estimating. And in terms of how we're planning on offsetting that, obviously, we have great sales momentum that's continuing on the top line. So the raise that we talked about in our guidance will be a part of that. Price will be a part of that.”

    asked by Robert Marcus · answered by Preston Wells

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Raised Outlook

    Stryker delivered robust organic sales growth of 10.1% in Q1 FY25, driven by strong U.S. performance and healthy international growth, despite one less selling day. This led to a 13.6% increase in adjusted EPS to $2.84. The company raised its full-year organic sales growth guidance to 8.5%-9.5% and reiterated adjusted EPS guidance of $13.20-$13.45, absorbing the impact of tariffs and the Inari acquisition.

    02

    Tariff Impact and Mitigation Strategies

    The company estimates a $200 million tariff impact🌐 in FY25 based on current regulations, which will primarily affect the cost of goods sold. Mitigation efforts include leveraging sales momentum, pricing initiatives, disciplined discretionary spending, supply chain optimization (including dual sourcing), and favorable foreign exchange impact🌐s. Management expects to offset these costs to achieve its operating margin expansion target.

    03

    Mako Momentum and New Product Launches

    Mako continues to be a significant growth driver, achieving its best-ever Q1 for installations in the U.S. and worldwide, with high utilization rates. The new Mako 4 SmartRobotics system, featuring a larger monitor and smaller footprint, was recently launched. The LIFEPAK 35 defibrillator and Pangea plating system are also experiencing robust demand and contributing meaningfully to sales, with international launches planned for both products.

    04

    Inari Acquisition and Integration

    The acquisition of Inari Medical was completed at the end of February, and integration is progressing well. Inari's performance has been strong, and its results are reported within the vascular division. The company is excited about Inari's commercial organization and R&D pipeline, including the recently launched Artix, its first arterial product. The divestiture of the U.S. Spinal Implants business was also completed, with the team now part of VB Spine.

    05

    Orthopaedics Market and Performance

    The Orthopaedics market remains healthy with strong demand and surgeon backlogs, expected to grow in the 4-5% range. Stryker's Orthopaedics segment grew 9.3% organically, driven by Mako, cementless knees (with 10-year survivorship exceeding 99%), and the Insignia Hip Stem. Trauma and Extremities showed outstanding 15.2% organic growth, powered by the successful Pangea plating system and strong performance in upper extremities.

    06

    International Growth as a Future Catalyst

    International markets are viewed as a significant catalyst for future growth, currently representing only 25% of total sales. The Inari business, for example, has only 7% of its sales internationally, presenting a massive opportunity. The company plans to leverage its successful product launches, like Mako, and expand them into international markets, anticipating a surge in growth similar to what has been observed in the U.S. after regulatory approvals.

    AI-generated summary of the company’s earnings call. Not investment advice.