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April 20, 2016 01:00 AM

Stryker earnings rise due to lower recall charges, taxes

Adam Rubenfire
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    Devicemaker Stryker Corp. reported a significant jump in first-quarter earnings following a drop in recall-related charges and lower taxes.

    The Kalamazoo, Mich.-based company reported $402 million in earnings in the three months ended March 31, up nearly 80% from the same period last year. That follows a notable drop in income taxes owed, as well as charges related to the Rejuvenate and ABG II hip stems, which have offset profits in recent quarters.

    Stryker spent $19 million on the recalls this quarter, down nearly 65% from $54 million during the same period last year, while income taxes were down 48% at $79 million. The company paid higher taxes last year tied to the opening of its European regional headquarters.

    Strong sales also aided profits, rising almost 5% to $2.5 million, banking on strong growth in its neurotechnology and spine segment. U.S. sales were up 8.9%, while international sales were down 4.6%, mostly due to unfavorable currency exchange rates. CEO Kevin Lobo acknowledged that the company has had some difficulty in emerging markets, including China.

    Lobo attributed success in the neuro and spine segment to volume growth, though he also noted that the business benefited from the higher pricing of a recently launched 3D-printed titanium device for the spine. Stryker announced in January that it would launch a state-of-the-art 3D printing facility this year as part of a $400 million to $450 million capital expenditure.

    Stryker's orthopedic and medical-surgical segments both grew by just over 3%. Trauma and extremities products and knee devices made up most of orthopedic segment growth, while surgical instruments led growth in the medical-surgical segment.

    The company said it now expects 2016 organic sales growth of 5.5% to 6.5%, up from previous guidance of 5% to 6%. Stryker foresees 2016 adjusted net earnings per diluted share to be in the range of $5.65 to $5.80, compared to previous guidance of $5.57 to $5.77. Second-quarter adjusted net earnings per share are expected to be between $1.33 to $1.38.

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