STRYKER CORP (SYK) Q1 2025 Earnings Summary

Executive Summary

• Q1 delivered double-digit organic growth and margin expansion: revenue $5.87B (+11.9% Y/Y) with organic +10.1%, adjusted EPS $2.84 (+13.6% Y/Y), and adjusted gross/operating margins of 65.5%/22.9% as pricing, mix and manufacturing efficiencies offset FX headwinds .
• Broad-based strength: MedSurg & Neurotechnology +13.4% to $3.51B, Orthopaedics +9.7% to $2.36B; Trauma & Extremities, Endoscopy, Instruments, Medical, and Hips/Knees all posted robust growth; Inari contributed to Vascular momentum; U.S. led (+13.4% as-reported) with healthy international growth (+7.3% as-reported) .
• Guidance pivot: organic sales growth raised to 8.5–9.5% (from 8–9%), while adjusted EPS set at $13.20–$13.45 reflecting inclusion of Inari dilution and offsetting an estimated ~$200M tariff impact through mitigation and operating leverage .
• Beat vs consensus: revenue beat by ~3% and adjusted EPS by ~4% as volumes stayed strong, pricing was positive, and execution remained disciplined; management reiterated ~100 bps FY operating margin expansion despite tariffs and higher OI&E from Inari financing .

What Went Well and What Went Wrong

What Went Well

• Double-digit organic growth with margin expansion: “robust organic sales growth of 10.1%… and continued to expand adjusted operating margins,” driven by strong procedural volumes and capital demand .
• Product engines firing: “best ever Q1 for [Mako] installations U.S. and worldwide,” strong demand for LIFEPAK 35, and Pangea plating “a wild success… absolutely on fire” lifting core trauma .
• Guidance confidence despite headwinds: Raised organic growth outlook to 8.5–9.5% and reiterated adjusted EPS inclusive of tariffs and Inari dilution, targeting ~100 bps operating margin expansion for 2025 .

What Went Wrong

• Tariffs: Estimated ~$200M headwind, more back-half weighted; CFO guiding to offset via pricing, sales momentum, OpEx discipline and supply chain optimization; FX now expected to be a $0.00–$0.10 EPS headwind (less negative than prior) .
• OI&E step-up: Adjusted other income/expense ~+$430M for 2025 vs prior ~$260M ex-Inari, reflecting debt to fund Inari and lower cash interest income .
• Medical supply chain: International supply disruptions in Medical linger into Q2; management said it’s factored into guidance .

Financial Results

Headline P&L and Margins (seasonally ordered oldest → newest)

Results vs S&P Global Consensus

• Beat magnitude: Revenue +$0.175B (+3.1%); Adjusted EPS +$0.11 (+4.0%).
• Values marked with * retrieved from S&P Global.

Segment and Geography (Y/Y growth; dollars in $B)

Selected Sub-Segments (Q1 2025; dollars in $B)

KPIs and Operating Drivers

• Organic sales growth: +10.1% (volume +9.4%, price +0.7%) .
• U.S. vs Intl organic: +10.7% U.S.; +8.5% International (strength in ANZ, Japan, Europe) .
• Adjusted OI&E: $73M higher Y/Y; 2025E adjusted OI&E ≈ $430M given Inari financing and reduced interest income .
• Cash from operations: $250M (Q1) as normal seasonality plus Inari-related onetime costs .

Non-GAAP reconciliation (EPS impact drivers, Q1 2025)

• Amortization of purchased intangibles $0.35; acquisition/integration $0.47; inventory step-up $0.07; structural optimization $0.07; impairments $0.06; EU MDR $0.02; recall $0.06; tax matters $0.05 (sum explains delta from $1.69 to $2.84) .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our 2024 momentum continued into the first quarter as we delivered double-digit organic sales growth and continued to expand adjusted operating margins.” — Kevin A. Lobo, Chair & CEO .
• “Mako… best ever Q1 for installations in the U.S. and worldwide… We remain on track for full U.S. commercial launch of Mako Spine in the second half of this year, and Mako Shoulder in the first quarter of 2026.” — Jason Beach, VP Finance & IR .
• “Our adjusted gross margin… +190 bps… driven by manufacturing cost improvements, positive pricing and business mix… we expect full year adjusted other income and expense to be approximately $430 million.” — Preston Wells, CFO .
• “Pangea has been just a wild success… Surgeons love it… lifting the core trauma business.” — Kevin Lobo .
• “We are raising… organic net sales growth… to 8.5% to 9.5%… [and] adjusted EPS… $13.20 to $13.45… inclusive of dilution from the Inari acquisition… offsetting a tariff impact of approximately $200 million.” — Company press release .

Q&A Highlights

• Tariffs cadence/mitigation: ~$200M impact based on current items; mitigation via pricing, OpEx discipline, supply chain optimization; run-rate impact most visible by Q4; back-half loaded through inventory flow .
• Ortho sustainability: Market “healthy… 4%–5% growth,” Stryker expects to “grow above” with Mako and cementless knees; T&E powered by Pangea and upper extremities .
• Capex environment: “Really nice growth… nothing… indicating a slowdown,” backlog elevated; mix shift toward rentals/leases doesn’t imply weaker demand .
• Inari integration: On track; strong early performance; arterial Artix launch expanding TAM; international only ~7% of Inari → runway .
• Pricing: Continued positive price in MedSurg & Neuro; less negative in Ortho; pricing is a lever to offset tariffs .

Estimates Context

• Q1 2025 vs S&P Global consensus: Revenue $5.87B vs $5.691B* (beat); Adjusted EPS $2.84 vs $2.7305* (beat); 23 revenue and 25 EPS estimates*. Values marked with * retrieved from S&P Global.
• Where estimates may adjust: Raised organic sales guide, higher OI&E ($430M) and tariff headwinds could shift EPS mix across the year; FX headwind narrowed to $0.00–$0.10 from $0.10–$0.15, modestly supportive to EPS ranges .

Key Takeaways for Investors

• Durable growth + execution: Four years hovering around double-digit organic growth; broad engines (Mako, Pangea, LIFEPAK 35, Hips/Knees) continue to outperform .
• Guidance quality: Organic growth raised; EPS guidance transparently rebased to include tariffs and Inari dilution with levers to offset; management still targets ~100 bps FY op margin expansion .
• Tariffs are manageable: ~$200M headwind is back-half weighted; watch pricing realization and supply-chain dual-sourcing initiatives; potential upside if tariff regime eases .
• OI&E reset: Higher 2025 adjusted OI&E (~$430M) from Inari financing is the main below-the-line drag—model appropriately .
• Robotics flywheel: Mako 4, Spine (2H25) and Shoulder (full launch Q1’26) extend the platform; installed base + utilization remain catalysts for Hips/Knees and broader ecosystem pull-through .
• International runway: Strong Q1 ex-U.S. growth; multiple product launches pending MDR timelines; Inari only ~7% OUS → multiyear expansion opportunity .
• Tactical: Near-term catalysts include ongoing Pangea and LIFEPAK 35 rollouts, Mako 4 adoption, and tariff policy developments; monitor Medical supply chain normalization into Q2 .

Appendix: Additional Context and Data

Additional operating details (Q1 2025)

• Organic growth composition: volume +9.4%, price +0.7% .
• Geography revenue split: U.S. $4.44B; International $1.43B .
• Cash flow highlights: CFO $250M, acquisitions -$4.75B (Inari), net debt financing +$2.98B; cash balance fell by $1.33B Q/Q .

Other relevant Q1 press releases

• Completion of sale of U.S. Spinal Implants business; VB Spine to have exclusive access to Mako Spine and Copilot for spine implants .
• Mako 4 showcased at AAOS with expanded applications (Total Hip revision, Spine, Shoulder) .
• Inari launched Artix thrombectomy system for arterial thrombus (pre-close; now part of Stryker) .

Notes:

• All financial figures are GAAP unless stated as adjusted. Non-GAAP reconciliations and EPS bridge per company disclosures .
• Consensus values marked with * retrieved from S&P Global.