Stryker’s 6.7% 4Q Recon Growth Raises Bar

Stryker Corporation had a very good fourth quarter. After tamping down expectations during his first quarterly call with analysts in October, Stryker’s new President and CEO Kevin Lobo was able to beat expectations in his second analyst call on January 23, 2013.

Source: Stryker Corporation

Stryker’s reconstructive sales grew by 6.7% during the quarter. Trauma and extremities led the way with sales growth of 10.2%. But the big surprise and good news for the orthopedic market was that reported knee and hip sales grew 5.4% and 3.6 respectively. The spine division also had a good quarter, growing by 6.4% on a reported basis.

Lobo gave his VP of Strategy and Investor Relations Katherine Owen the chance to give the good news. Owen told analysts that company management is pleased with the momentum it is seeing in the U.S. in both hips and knees, crediting some of that to the company’s GetAroundKnee campaign.

On the hip side, she noted the Accolade launched in the second quarter of last year. “I think at this point, at the very least, the [recon] market is stable, to maybe modestly improved in the fourth quarter. How much share shifting we’ve seen, it’s just too early to predict until all the numbers come in. But we feel pretty good about the stability of the market and certainly some of the momentum that we’re seeing.”

Core spinal implant sales accelerated to post mid-single-digit constant currency sales growth, helped by a double-digit increase from the biologics products obtained by the acquisition of Orthovita.

Lobo: “Good Outlook for 2013”

“And if you look at our recon business over the full year, ” added Lobo, “it was a very strong year. If you go all the way back to January, we’ve had pretty much a strong year across knees and hips with knees accelerating more. Hips, obviously, had a little bit of a dip in the third quarter and then picked right back up. Hips have been on a pretty good roll for almost eight quarters now. So it’s kind of sustained strong performance. I’m very happy with the leadership team we have out there. And so really have a good outlook going into next year.”

Some analysts were ready to declare the end of the big dip from the Great Recession.

Piper Jaffray analyst Matt Miksic said that if the remaining manufacturers report results in-line with analyst estimates, constant currency growth for the reconstructive market will be up 2.2%. “For context, this compares to U.S. recon growth of 0.9% in 3Q12 and 0.1% in 4Q11. We view these trends as supportive of our view that growth trends in the ortho market continues to improve after decelerating and bottoming during the period from mid-2008 through the end of 2011.”

Room to Grow

Responding to a question from BMO Capital Market analyst Joanne Wuensch on how he plans to make his mark on the company, Lobo got to talking about one of his favorite subjects, globalization and the recent acquisition of Trauson, a Chinese orthopedic manufacturer.

“We have a lot of room to grow. There are a lot of products that have been a great success within the U.S. that we have yet to really operationalize outside the U.S. So globalization and innovation is a big area of opportunity, ” responded Lobo. Expectations for Lobo and Stryker have just gone up.

For the full year 2013, the company is projecting constant currency sales growth in a range of 3.0% to 5.5%.