Stryker Corporation (SYK) Earnings & Analysis

Latest quarter

Stryker reported Q3 revenue of $6.5 billion, up from $6.1 billion a year earlier but below the consensus estimate of $6.6 billion. Adjusted earnings per share were $3.52, also below the consensus estimate of $3.56. On a diluted basis, earnings per share fell to $1.96 from $2.22.

The company’s filing attributed its 7.7% organic sales growth primarily to higher unit volume. It reported net sales growth of 9.2% in MedSurg and Neurotechnology and 5.7% in Orthopaedics. CFO Preston Wells said U.S. knee organic sales grew 1.3%, while U.S. hip organic sales declined 0.6%.

Stryker reported gross margin of 65.2%, up from 63.6% a year earlier, while operating margin declined to 15.9% from 18.7%. Wells said adjusted gross margin benefited from operational efficiencies and a net tariff benefit. The company generated $1.2 billion in free cash flow, compared with $1.5 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Kevin Lobo said Stryker’s overall results fell short of its expectations as hip and knee procedures slowed. In the U.S., he attributed slower procedural growth to affordability concerns from higher insurance premiums and deductibles, and said increased pre-authorization denials were delaying treatment. He also cited disruption, strikes and government funding decisions in Europe and the Middle East.

Lobo said Stryker had “not been winning at our historical rate.” He said the first-quarter cyber incident and July implementation of SAP in Orthopaedics distracted teams and affected execution on new products, including Mako RPS and Triathlon Gold. Asked about the timing of the slowdown, he said delayed order entry meant the company gained visibility into the quarter in September; he did not attribute the slowdown solely to that month.

On peripheral vascular, Lobo said revenue from a regulatory milestone at a China joint venture helped offset sales lost to a supply disruption. He expects inventory and product availability to continue normalizing through year-end. Asked about demand for capital equipment, investor relations vice president Nick Mead said the order book remained elevated and that Stryker was focused on delivering against demand. Wells said the company needed to match production and supply with that demand.

Wells said Stryker expects modest pricing across its portfolio, with positive pricing more likely in MedSurg and a slightly negative position in Orthopaedics. He said adjusted operating margin rose as gross margin improved and expenses were controlled.

Asked about Stryker’s investment in CMR Surgical, Lobo said the company planned to commercialize its robot in the U.S. as an investor and hoped eventually to purchase the asset, without specifying when. He also said Stryker expected a similar overall organic growth rate in Q4 to Q3, assuming the quarter’s procedure environment continues.

Guidance

Stryker now expects FY2026 organic net sales growth of 6.5% to 7%, compared with its previous range of 8.3% to 9.3%. It expects adjusted earnings per share of $14.80 to $14.90, previously $14.95 to $15.10.

Wells said the company now expects a full-year adjusted effective tax rate of 15.5% to 16%, compared with its previous expectation of 15% to 16%. He also expects adjusted other income and expense of approximately $400 million, compared with the earlier expectation of approximately $420 million.