Tuesday, medical technology company Stryker Corp. (SYK) reported a 16.4% drop in profit for the third quarter, predominantly hit by restructuring charges. Adjusted quarterly earnings grew 1.3%, and were in line with Street expectations, while revenues beat market projections. Going ahead, the company trimmed the upper end of its adjusted earnings outlook for fiscal year 2009.
The Kalamazoo, Michigan-based company's net earnings for the third quarter dropped to $229.0 million from $273.8 million in the year-earlier quarter. On a per share basis, earnings slid 13.4% to $0.58 from $0.67 in the year-ago quarter.
Results for the third quarter include restructuring charges of $48.4 million, net of income tax benefits related to decisions to terminate certain third-party agent agreements at the company's EMEA Division, to simplify the organization structure at its Biotech, EMEA, Japan and Canada divisions and to discontinue selling certain products.
Excluding items, net earnings edged up to $277.4 million from $273.8 million in the same quarter last year. Adjusted earnings increased 4.5% to $0.69 per share from $0.66 per share last year.
On average, 26 analysts polled by Thomson Reuters expected the company to earn $0.69 per share for the quarter. Analysts' estimates typically exclude one-time charges and gains.
In the sequentially preceding second quarter, Stryker's net income declined 4.7% to $291.3 million from $305.8 million in the prior-year. Earnings per share, however, remained unchanged at $0.73, on a lower share count for the quarter.
Net sales for the recent third quarter was flat at $1.65 billion with last year, yet topping analysts consensus estimate of $1.62 billion for the quarter. On a constant currency basis, net sales, however, increased 1.2% for the quarter.
In the preceding second quarter, net sales decreased 4.6% to $1.63 billion from $1.71 billion in the year-ago period,
Stryker's domestic sales for the third quarter under review increased 0.2% to $1.07 billion from the previous-year quarter, as a 7.9% increase in shipments of Orthopaedic Implants was partially offset by an 8.3% decrease in shipments of MedSurg Equipment.
International sales for the quarter dropped 0.3% year-over-year to $584 million, while on a constant currency basis, sales rose 3.1% from last year, as a result of a 5.5% increase in shipments of Orthopaedic Implants partially offset by a 2.3% decrease in shipments of MedSurg Equipment.
Stryker's Orthopaedic Implants recorded worldwide sales of $1.01 billion for the quarter, up 5.5% from last year, and on a constant currency basis, sales grew 6.9% year-over-year. Worldwide sales of MedSurg Equipment were $637 million, down 7.7% on a reported basis, and decreased 6.7% on a constant currency basis.
Operating income for the quarter declined 14.5% to $311.4 million from last year.Gross profit margin for the quarter expanded to 67.4% from 67.2% in the same quarter last year.
Amongst others in the sector, Warsaw, Indiana-based orthopedic and dental reconstructive implant maker Zimmer Holdings, Inc. (ZMH), is slated to release its third quarter results on Thursday, October 22. On average, 24 analysts currently estimate the company to earn $0.86 per share for the quarter.
For the nine-month period, net earnings decreased 7.9% to $801.4 million from $870.1 million in the year-earlier period. On a per share basis, earnings decreased 3.8% to $2.01 from $2.09 in the same period last year.
Excluding items, earnings for the period slid 2.3% to $849.8 million from $870.1 million in the corresponding period last year. On a per share basis, adjusted earnings, however, increased 1.9% to $2.13 from $2.09 last year.
Net sales for nine months slipped 2.2% to $4.88 billion from $5.00 billion in the year-ago period.
For the fiscal year 2009, Stryker now expects earnings in the range of $2.90 - $3.00 per share, compared to earlier issued forecast of $2.90 - $3.10 per share. This indicates an increase of 2% to 6% over adjusted net earnings of $2.83 per share in 2008. Analysts currently expect the company to earn $2.94 a share for the full year.
Net sales, on constant currency basis, is now expected to increase in the range of 1% to 2%, compared to earlier issued estimate of 1% to 3% for the year. However, if foreign currency exchange rates hold near September 30, 2009 levels, Stryker anticipates a favorable impact on net sales of nearly 3.2% to 4.2% in the fourth quarter of 2009 and an unfavorable impact on net sales of around 1.6% to 2.0% for the full year of 2009.
SYK closed Tuesday's regular trading at $45.28, down $0.87 or 1.89%, on a volume of 3.27 million shares on the NYSE. In after hours, the stock gained $1.61 or 3.56%, trading at $46.89. In the past 52 weeks, the stock trended in a broad range of $30.82 - $56.22, with a three-month average volume of 2.52 million shares.
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