Stryker Earnings: Series of New Product Launches and Indication Expansion Offer Bright Prospects

Stryker SYK delivered solid third-quarter results that keep the firm on track to meet our full-year top- and bottom-line expectations. Year-to-date expenses have hit our estimates nearly on the nose. Though we haven’t altered our underlying assumptions, we do plan to incrementally inch up our fair value estimate to reflect time value of money. Quarterly revenue growth was up 9% in constant currency, driven by double-digit growth from instruments, endoscopy, and spine. With Stryker in the midst of launching a number of new products, this show of consistent innovation underscores our favorable view of Stryker’s wide economic moat.

Recent adoption of new products, as well as additional launches anticipated next year, should support our expectation for robust revenue and earnings growth in 2024. In particular, quarterly endoscopy sales were up 11% in constant currency, fueled by the rollout of the 1788 camera platform. This second-generation 4K visualization system can see what the human eye cannot. For example, used in conjunction with the drug cytalux, 1788 can show where the lung cancer lesions are, thereby making it easier for surgeons to achieve clean margins while preserving healthy tissue. This is a meaningful differentiation from Stryker.

We were pleased to see strong volume gains, with price adding topspin. Not surprisingly, this was most evident in those product areas where there has been more innovation, such as medsurg and neurotechnology. Quarterly growth in knees moderated to 7% in constant currency. However, the prior-year period was particularly strong, making for a tough comparison. Management comments about strong underlying procedure volume and the orthopedic backlog suggest this strength should carry through 2024. Upcoming Mako indications for spine and shoulder on deck next year should also contribute to solid orthopedic growth in 2024.