Orthopedic devices maker Stryker Corporation (SYK) has announced preliminary results for the fourth quarter and full-year 2014. The company also updated its foreign exchange outlook for 2015 based on recent foreign currency movements, which had an unfavorable impact on its fourth-quarter and full-year earnings.
Stryker estimates fourth-quarter and full-year adjusted earnings in the range of $1.43–$1.45 and $4.72–$4.74 per share, respectively. Both the fourth-quarter and full-year projections compare unfavorably with their corresponding Zacks Consensus Estimates of $1.46 and $4.75.
The fourth quarter includes a negative foreign exchange impact of roughly 6 cents per share, while the full year is hurt by a negative impact of around 15 cents per share. Given the adverse impact of recent foreign currency movements, Stryker expects 2015 adjusted earnings to be negatively impacted by roughly 20 cents per share.
The company previously projected a currency impact of 10–12 cents on its 2015 earnings. We note that U.S. manufacturers such as Stryker that sell products overseas are hurt by a strengthening U.S. dollar, which has benefited from more upbeat U.S. economic prospects compared with the rest of the world.
Nevertheless, Stryker estimates strong organic revenue growth of 5.5% and 5.8% for the fourth-quarter and full-year, respectively.
Fourth-quarter revenues are projected to grow 6.1% (or 8.6% in constant currency) year over year to $2.6 billion, in line with the current Zacks Consensus Estimate. The company’s estimated revenues of $9.7 billion for full-year 2014 (up 7.3% year-over-year) are also in sync with the current Zacks Consensus Estimate.
The projected revenue upside can be primarily attributed to robust sales growth at the MedSurg segment. Additionally, Stryker sold 20 Mako Rio Robotic Arm Interactive Systems during the fourth quarter which boost results at the Orthopaedics segment.
However, Stryker’s international revenues are growing at a sluggish pace primarily due to the strong U.S dollar, which is subsequently hurting its bottom line. The company is also witnessing a negative trend in earnings estimate revision. For 2015, five estimates moved down over the past one month while one estimate moved south over the past week. Consequently, the Zacks Consensus Estimate has declined to its current level of $5.17 from $5.20 a month ago.
Moreover, the orthopedic industry is highly competitive and Stryker faces strong competition from players like Zimmer Holdings (ZMH), Johnson & Johnson (JNJ), Smith & Nephew (SNN) and privately-held Biomet, Inc.
Currently, Stryker carries a Zacks Rank #3 (Hold).
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