STRYKER CORP (SYK) Q4 2024 Earnings Summary

Executive Summary

Q4 2024 delivered double‑digit growth: net sales rose 10.7% to $6.44B, organic growth 10.2%, and adjusted EPS increased 15.9% to $4.01, while GAAP EPS fell 52.7% to $1.41 due to Spine‑related goodwill and asset impairments totaling $818M .
2025 guidance: organic net sales growth of 8–9% and adjusted EPS of $13.45–$13.70; FX headwind ~1% to sales and ~$0.10–$0.15 to EPS; adjusted operating margin targeted at 26.3% .
Portfolio actions: pending Inari acquisition expected to add ~$590M of 2025 sales (10‑month stub), dilute adjusted op margin by 0–20 bps and EPS by $0.20–$0.30; sale of Spinal Implants will be absorbed within guidance .
Operational momentum: record Mako installations, robust hospital CapEx demand, and broad‑based double‑digit growth in MedSurg/Neurotechnology and Trauma & Extremities underpin margin expansion despite higher interest expense and FX headwinds .

What Went Well and What Went Wrong

What Went Well

Double‑digit organic growth with margin expansion; adjusted operating margin up 200 bps to 29.2% in Q4 and +110 bps to 25.3% for FY, driven by positive pricing, manufacturing cost improvements, and mix .
Mako momentum: “record quarter and year of installations,” with U.S. approaching ~2/3 knees and ~1/3 hips using Mako; global ~45% knees and ~20% hips; first Mako Spine cases completed; FDA approval for Mako Shoulder .
Capital demand robust: healthy procedural volumes and strong order books in Medical, Instruments, Endoscopy (e.g., LIFEPAK 35) supporting double‑digit growth and elevated capital pipeline .

What Went Wrong

GAAP earnings impacted by Spine impairments: Q4 reported operating margin 9.0% and diluted EPS $1.41, reflecting $818M non‑cash charges tied to goodwill and assets held for sale in Spine .
FX headwinds and higher interest expense: ~0.5% FX drag on Q4 sales and ~$0.05 drag on Q4 adjusted EPS; other income/expense higher on debt issuance, with ~$260M expected in 2025 .
Orthopaedics pricing still modest at +0.3% in Q4 (vs volume +9.9%), highlighting continued need for mix and innovation leverage despite solid subsegment performance .

Financial Results

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Billions)	$5.422	$5.494	$6.436
Reported Diluted EPS ($)	$2.14	$2.16	$1.41
Adjusted EPS ($)	$2.81	$2.87	$4.01
Reported Gross Margin %	63.0%	64.0%	64.9%
Adjusted Gross Margin %	64.2%	64.5%	65.3%
Reported Operating Margin %	19.4%	19.7%	9.0%
Adjusted Operating Margin %	24.6%	24.7%	29.2%

YoY context: Q4 net sales +10.7%; reported diluted EPS −52.7%; adjusted EPS +15.9% .

Segment Breakdown – Q4 2024

Segment/Subsegment	Q4 2023 Sales ($MM)	Q4 2024 Sales ($MM)	As Reported % Change	Constant Currency % Change
MedSurg & Neurotechnology (Total)	$3,511	$3,882	10.6%	11.1%
• Instruments	$726	$790	8.8%	9.1%
• Endoscopy	$902	$1,006	11.5%	12.3%
• Medical	$1,042	$1,142	9.6%	10.1%
• Neurovascular	$320	$341	6.8%	7.8%
• Neuro Cranial	$521	$603	15.5%	15.8%
Orthopaedics (Total)	$2,304	$2,554	10.8%	11.3%
• Knees	$630	$687	9.0%	9.5%
• Hips	$414	$463	11.6%	12.2%
• Trauma & Extremities	$860	$996	15.8%	16.1%
• Spinal Implants	$181	$186	3.2%	3.7%
• Other Orthopaedics	$219	$222	1.3%	2.2%

Geography: U.S. sales $4,873 (+11.8%), International $1,563 (+7.2%; +9.2% cc) .

KPIs and Mix Drivers

KPI	Q2 2024	Q3 2024	Q4 2024
Organic Net Sales Growth (%)	9.0%	11.5%	10.2%
Unit Volume Contribution (%)	7.9%	10.3%	9.1%
Pricing Contribution (%)	+1.1%	+1.2%	+1.1%
FX Impact on Sales (%)	−0.9%	−0.1%	−0.5%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Organic Net Sales Growth	FY 2025	N/A	8.0%–9.0%	New
Adjusted EPS	FY 2025	N/A	$13.45–$13.70	New
FX Impact	FY 2025	N/A	~1% sales headwind; −$0.10 to −$0.15 EPS	New
Adjusted Operating Margin	FY 2025	N/A	~26.3% target	New
Other Income/Expense	FY 2025	N/A	~$260M	New
Effective Tax Rate	FY 2025	N/A	15%–16%	New
CapEx	FY 2025	N/A	$800–$850M	New
Inari Stub Sales	FY 2025	N/A	~$590M (10 months)	New
Inari Dilution	FY 2025	N/A	0–20 bps op margin; −$0.20 to −$0.30 EPS	New
Spine Divestiture Impact	FY 2025	N/A	Absorbed in guidance	Maintained
Dividend	Q4 2024	Prior $0.80	$0.84 (+5%) payable Jan 31, 2025	Raised

Note: Q1 2025 will have one fewer selling day; seasonality similar to 2024 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 and Q3)	Current Period (Q4 2024)	Trend
Margin Expansion	Commitment to expand margins; adjusted OI margin 24.6% in Q2 ; 24.7% in Q3	Adjusted OI margin 29.2% in Q4; FY 25.3%; drivers: pricing, manufacturing, mix	Improving
Capital Equipment Demand	Healthy demand supporting guidance in Q2/Q3	Robust hospital CapEx budgets; elevated order book; LIFEPAK 35 traction	Sustained strength
Robotics (Mako)	Ongoing adoption in knees/hips	Record installs; Mako Spine first cases; Mako Shoulder FDA approval; measured rollouts	Broadening scope
Spine Strategy	Spine reported within Orthopaedics & Spine in Q2/Q3	Sale of Spinal Implants; enabling tech remains; interventional spine moved to Neuro Cranial	Portfolio reshaping
Pricing	Positive pricing benefit ~0.5%–1.0% (Q2/Q3)	+1.1% price in Q4; margin tailwind	Consistently favorable
FX	Slight/moderate headwinds noted	Q4 ~−0.5% sales headwind; 2025 FX headwind embedded in guidance	Persistent drag
Regional Trends	U.S. strong; international growth in Q3	U.S. +10.9% organic; international +7.9% led by Canada, Europe, EM	Broad-based

Management Commentary

“We delivered another year of double‑digit organic sales growth while continuing to expand adjusted operating margins and drive adjusted earnings per share growth.” – Kevin Lobo, CEO .
“Our adjusted operating margin was 29.2%… driven by positive pricing, manufacturing cost improvements and mix.” – Glenn Boehnlein, CFO .
“We had another record quarter and year of [Mako] installations in the U.S. and worldwide… we are approaching 2/3 of knees and 1/3 of hips performed using Mako.” – Jason Beach, VP IR .
“We announced an agreement to sell our Spinal Implants business… we remain committed to enabling technologies for the spine market, including our Q Guidance System, Copilot and Mako Spine.” – Kevin Lobo .
“We expect organic net sales growth to be in the range of 8% to 9% for 2025, and adjusted net earnings per share to be $13.45 to $13.70… assumes a full year adjusted operating margin of 26.3%.” – Glenn Boehnlein .

Q&A Highlights

Spine divestiture and seasonality: Management expects EPS and seasonality cadence to mirror 2024; Spine impact is not material at the consolidated level .
Inari acquisition: High double‑digit growth assumed; stub period ~$590M sales; dilution at EPS from financing; ROIC expected to reach WACC in 5–7 years per typical framework .
Margin expansion drivers: Purchasing, low‑cost manufacturing expansion (Poland, Tijuana), shared services leverage, R&D cost efficiencies, global pricing gains .
Capital environment and ASCs: Hospital CapEx healthy; increasing ASC adoption with U.S. knees ~17% and hips ~14% in ASCs in Q4, steadily rising .
Tariffs/macro: Monitoring potential Mexico/Canada tariffs; limited exposure (1 of ~40 plants); too early to assess impact .

Estimates Context

Attempted to retrieve S&P Global consensus for Q4 2024 EPS and revenue and prior quarters; data was unavailable due to SPGI daily request limit exceeded. As a result, comparisons vs. Wall Street consensus could not be presented in this recap. When available, future comparisons will anchor to S&P Global consensus [GetEstimates errors].

Key Takeaways for Investors

Quality of beat: Strong underlying performance with double‑digit organic growth and significant adjusted margin expansion; GAAP EPS decline was driven by non‑cash Spine impairments, not core operations .
2025 setup constructive: Organic 8–9% growth and adjusted EPS $13.45–$13.70 reflect confidence in demand, pricing, and operating leverage despite FX and interest expense headwinds .
Robotics and portfolio catalysts: Record Mako adoption plus the addition of Mako Spine and Mako Shoulder create medium‑term procedural and mix tailwinds; Spine divestiture sharpens focus on higher‑growth adjacencies .
Segment breadth matters: MedSurg/Neurotechnology and Trauma & Extremities continue to post double‑digit growth; LIFEPAK 35 and Pangea plate system add near‑term momentum .
Watch FX and financing: FX ~~1% sales headwind and higher interest expense (~~$260M other income/expense) temper EPS; margin expansion plan offsets much of this pressure .
Transaction impacts: Inari adds growth and endovascular adjacency with modest dilution in 2025; Spine divestiture is strategically aligned and largely immaterial to consolidated growth trajectory .
Dividend signaling: 5% raise to $0.84 in Q4 indicates confidence in cash generation and capital allocation consistency .