Stryker raises 2025 outlook to 9.8%-10.2% organic sales growth as momentum accelerates

Earnings Call Insights: Stryker Corporation (SYK) Q3 2025

MANAGEMENT VIEW

* CEO Kevin Lobo stated, "Our third quarter results demonstrate our broad business strength and ongoing commitment to margin expansion. We delivered strong organic sales growth of 9.5% against last year's high 11.5% comparable. We also delivered double-digit adjusted EPS growth of 11.1% despite tariff headwinds, which picked up meaningfully versus Q2." Lobo highlighted high single-digit growth in MedSurg and Neurotechnology, double-digit growth in Orthopedics, and robust U.S. organic sales growth of 10.6%—fueled by Vascular, Trauma and Extremities, Neuro Cranial, and Instruments businesses. He emphasized "notable contributions from South Korea, Japan and emerging markets" in international sales and reiterated the company's commitment to future product launches outside the U.S.
* Lobo announced two small acquisitions: Guard Medical's NPseal products, strengthening orthopedic instruments, and advanced medical balloons for Sage, noting, "These acquisitions demonstrate our commitment to deals that deepen our portfolio and enhance growth."
* Lobo confirmed, "We are raising our full year 2025 outlook. We are firmly on track to deliver a second consecutive year of 100 basis points of adjusted operating margin expansion backed by strong execution and conviction in the sustained growth and earnings power of our businesses."
* CFO Preston Wells stated, "Organic sales growth was 9.5% for the quarter compared to the third quarter of 2024...Pricing had a 0.4% favorable impact as we continue to see positive trends from our pricing initiatives across many of our businesses." Wells added, "Our adjusted earnings per share of $3.19 was up 11.1% from the same quarter last year, driven by our strong sales growth and margin expansion, partially offset by higher interest expense."
* Vice President of Finance & Investor Relations Jason Beach reported, "We delivered our best ever Q3 for Mako installations, both in the U.S. and worldwide. Mako continues to see high utilization rates, further bolstering our #1 position in U.S. hips and knees."

OUTLOOK

* Wells updated, "we are raising our full year guidance and now expect organic net sales growth of 9.8% to 10.2%, and adjusted earnings per share to be in the range of $13.50 to $13.60."
* He added, "Our updated sales guidance includes a modestly favorable pricing impact. In addition, foreign exchange is expected to have a slightly positive impact on both sales and earnings per share should rates hold near current levels."
* Lobo emphasized, "We have good momentum exiting Q3 and expect a strong finish to the year."

FINANCIAL RESULTS

* Wells reported, "Our adjusted gross margin of 65% was favorable by 50 basis points over the third quarter of 2024 despite tariff headwinds, which we now estimate will have a net impact of approximately $200 million for the full year 2025."
* Adjusted operating margin stood at 25.6% of sales, 90 basis points favorable to the third quarter of 2024.
* Year-to-date cash from operations was $2.9 billion, with Wells attributing this to year-over-year working capital improvements.
* Segment highlights included MedSurg and Neurotechnology organic sales growth of 8.4%, U.S. Instruments sales growth of 11.5%, Endoscopy U.S. sales growth of 7.9%, and Vascular U.S. organic sales growth of 13.4%. Orthopedics organic sales growth reached 11.4%, with the U.S. Knee business up 8.4% and the U.S. Hip business up 8.7%.

Q&A

* Robert Marcus, JPMorgan: Asked about global procedure volumes and capital equipment market health. Lobo responded, "Procedure volumes are very healthy, which affects, obviously, our implants as well as our small capital. And the capital markets are really strong. The balance sheets are strong with hospitals."
* Marcus inquired about margin drivers into Q4. Wells answered, "We're going to continue with our focus around margin improvement that's driving upside on our gross margins as well as in the SG&A lines. The big offset this year is tariffs."
* Larry Biegelsen, Wells Fargo: Asked about sustaining 10% organic growth and margin expansion into 2026. Lobo stated, "This is our fourth consecutive year of growing roughly 10% organically...this is a sustainable, durable high-growth business."
* Biegelsen followed up on M&A strategy. Lobo said, "All of our businesses are lining up their targets...We do have a strong balance sheet. We can do larger deals if they are going to be value creating for the company."
* Ryan Zimmerman, BTIG: Asked about U.S. Knee business and price pressure. Lobo explained, "We're in a great position with our Knee business...This momentum has just been building."
* Travis Steed, BofA: Asked about Inari integration and growth trajectory. Lobo shared, "We do expect double-digit growth in Q4 and then again in Q1...the burn-through will be completed by the end of the first quarter."
* Samantha Munoz, Piper Sandler: Asked about Ortho other category and Medical supply chain. Beach said, "Record installation of Mako...really strong strength," and on Medical, "October was off to a good start. And so we certainly expect that we'll have positive performance as we go throughout the quarter."
* Joanne Wuensch, Citi: Asked about margin trajectory. Lobo deferred to the upcoming Analyst Day, indicating more details to come.

SENTIMENT ANALYSIS

* Analyst tone was largely positive but included probing on margin sustainability, supply chain disruptions, and competitive positioning, with some skepticism around pricing and Medical supply chain impacts.
* Management tone remained confident and assertive during prepared remarks and Q&A, particularly with phrases such as "We are firmly on track" and "We do expect double-digit growth," while occasionally deferring detailed forward-looking commentary to the forthcoming Investor Day.
* Compared to Q2, management sustained a similarly confident tone, but analysts in Q3 pressed more on durability of growth and supply chain resilience.

QUARTER-OVER-QUARTER COMPARISON

* Q3 saw a continued commitment to margin expansion and organic growth, with the organic sales growth rate slightly down from 10.2% in Q2 to 9.5% in Q3, yet EPS growth remained strong.
* Management raised full-year guidance in both quarters, but Q3 guidance moved to a slightly higher range for organic net sales growth and maintained the EPS range.
* Analysts in Q3 focused more on pricing dynamics, M&A appetite, and supply chain challenges, while Q2 centered on capital demand and emerging market opportunities.
* Management's confidence in Mako installations and international expansion remained consistent, while tariff headwinds were cited as more pronounced in the second half.

RISKS AND CONCERNS

* Management cited ongoing tariff headwinds, estimating an impact of approximately $200 million for 2025.
* Supply chain disruptions continued to affect the Medical business, though management expects acceleration in Q4.
* Analysts questioned the potential for pricing pressure in Orthopedics and supply chain recovery, to which management cited ongoing initiatives and expected resilience.

FINAL TAKEAWAY

Stryker’s third quarter results highlight broad-based strength across its portfolio, with robust organic sales and EPS growth. The company raised its full-year 2025 outlook, projecting 9.8% to 10.2% organic net sales growth and adjusted EPS of $13.50 to $13.60. Management remains focused on margin expansion, product innovation, and targeted acquisitions, while addressing ongoing tariff and supply chain challenges. The momentum in procedural volumes, strong order book, and leadership in robotic-assisted surgery support a positive outlook for the remainder of the year.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/syk/earnings/transcripts]

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