What Stryker (SYK) Said on Its Q3 Earnings Call

Key Points

• Stryker lowered its full-year outlook to 6.5%–7% organic sales growth and adjusted EPS of $14.80–$14.90, citing slower hip and knee procedures, peripheral vascular supply constraints and capital-equipment execution risks.
• Third-quarter organic sales grew 7.7%, led by 9.1% growth in MedSurg and Neurotechnology, while Orthopaedics rose 5.9%; adjusted EPS increased 10.3% to $3.52 as margins expanded.
• The company named Spencer Stiles as CEO successor to Kevin Lobo and advanced its pipeline through the ZuriMED acquisition, an investment and U.S. distribution agreement with CMR Surgical, and planned product launches through 2027.

Stryker NYSE: SYK reported third-quarter organic sales growth of 7.7% and adjusted earnings per share of $3.52, while lowering its full-year outlook to reflect a slowdown in hip and knee procedures, lingering peripheral vascular supply constraints and execution risks tied to capital equipment sales.

Organic sales in the quarter rose 9.1% in MedSurg and Neurotechnology and 5.9% in Orthopaedics. Adjusted EPS increased 10.3% from the prior-year quarter, supported by gross-margin expansion and expense discipline. The company also announced that Spencer Stiles will become its next CEO, succeeding Kevin Lobo.

Hip and Knee Market Slows

Lobo said the company’s overall third-quarter performance fell short of its expectations, largely because of weakness in the hip and knee reconstruction market. U.S. procedure growth slowed amid affordability concerns tied to higher insurance premiums and deductibles, while increased pre-authorization denials created delays in patient access to treatment, he said.

Outside the U.S., Europe and the Middle East remained soft because of regional disruption, strike-related delays and government funding decisions, according to Lobo.

“It is now clear that there is a market slowdown,” Lobo said. During the question-and-answer session, he estimated hip and knee market growth at roughly 2.5% for the year, adding that the market appeared to slow further during the third quarter.

Stryker’s U.S. knee sales grew 1.3% organically in the quarter, while U.S. hip sales declined 0.6%, both against strong prior-year comparisons. Lobo said the company also has not been gaining business at its historical rate, citing the disruption caused by a first-quarter cyber incident and a July SAP implementation in Orthopaedics.

Although Mako sales remained strong, Stryker said adoption of its Mako RPS and Triathlon Gold offerings was behind expectations. The company is working to improve commercial execution, competitive conversions and new-product adoption. Lobo also said Stryker plans to introduce a powered hip impactor next year to address a product gap in its hip portfolio.

MedSurg Growth and Vascular Supply Recovery

MedSurg and Neurotechnology posted 9.1% organic growth, including 9.6% growth in the U.S. Endoscopy sales in the U.S. increased 13%, aided by demand for operating room infrastructure and renovations, along with continued double-digit sports medicine growth. Medical sales rose 10%, with double-digit growth from Sage and Smart Care.

Instruments U.S. sales grew 4.8% against a 15.3% comparison in the previous year. Stryker cited double-digit growth in interventional spine and surgical technologies, partly offset by deferred neurosurgical capital purchases ahead of the planned Sonopet 3 launch. The company said the ultrasonic aspiration platform received FDA 510(k) clearance earlier in October.

Vascular U.S. organic sales rose 13%, benefiting from a one-time revenue contribution associated with a regulatory approval milestone at the company’s peripheral vascular joint venture in China. That contribution partly offset sales lost during an ongoing supply disruption.

Lobo said inventory levels and product availability are expected to continue normalizing through year-end. Stryker expects to begin commercializing AVS’s intravascular lithotripsy platform in 2027, subject to FDA approval, and also expects data from the PEERLESS II FlowTriever study.

Margins, Cash Flow and Revised Outlook

Adjusted gross margin was 65.4%, up 40 basis points year over year, reflecting a net tariff benefit and operational efficiencies. Adjusted operating margin increased 60 basis points to 26.2% of sales.

Stryker ended the quarter with about $3.3 billion in cash and cash equivalents. Year-to-date cash from operations totaled $3.3 billion, up approximately 14% from the prior year. The company repurchased $1 billion of stock during the quarter and received board authorization for an additional $3 billion in future repurchases.

The company now expects full-year organic net sales growth of 6.5% to 7%, with adjusted EPS of $14.80 to $14.90. Its updated sales outlook assumes fourth-quarter organic growth similar to the third-quarter rate and continued strength in capital demand, though management said it is taking a more conservative view of its ability to fulfill equipment demand.

For the fourth quarter, Chief Financial Officer Preston Wells identified Trauma and Extremities, Medical and Instruments as expected sources of strength. U.S. Ortho Tech sales rose 18% in the third quarter, driven by Mako demand and orthopaedic power tools, while Trauma and Extremities grew 4.5% against a 13.2% prior-year comparison.

M&A Activity and Product Pipeline

Stryker completed its acquisition of ZuriMED, adding FiberLocker technology for rotator cuff repair and orthopedic soft-tissue augmentation. Lobo called the technology differentiated and said it complements the company’s shoulder portfolio.

The company also announced an investment in CMR Surgical and an agreement to serve as exclusive U.S. sales agent for CMR’s Versius soft-tissue robotic platform. Nick Mead, Stryker’s vice president of investor relations, said Versius has been used in more than 50,000 procedures globally.

Lobo said Stryker intends to take a disciplined, lower-risk approach by commercializing the platform in the U.S. as an investor rather than immediately acquiring CMR. He said the company ultimately hopes to purchase the business if U.S. commercialization proves successful.

Looking toward 2027, management highlighted expected launches or continued ramps for Neptune, AVS, System 10 power tools, the 1888 endoscopy platform, Mako RPS, Triathlon Gold and Mako Shoulder. Wells said Stryker has not provided formal 2027 guidance but expects to grow at the high end of its markets.

About Stryker (NYSE:SYK)

Stryker Corporation NYSE: SYK is a global medical technology company that develops and manufactures products used by healthcare providers in hospitals, surgical centers and other clinical settings. Its offerings are designed to support orthopaedic procedures, surgery, emergency care, neurovascular treatment and patient handling.

The company's product portfolio includes orthopaedic implants and instruments, products for trauma and spine procedures, surgical equipment, endoscopy systems, patient beds and stretchers, emergency medical equipment, and neurovascular devices used in the treatment of conditions such as stroke.

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