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What's in the Offing for Stryker's (SYK) Earnings in Q3?

Zacks Equity Research

Stryker Corporation SYK is scheduled to release third-quarter 2019 results on Oct 29 after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 2.6%. Further, it has an average four-quarter positive surprise of 1.7%.

Which Way Are Estimates Trending?

The Zacks Consensus Estimate for third-quarter earnings per share is pegged at $1.91, indicating an improvement of 13% from the year-ago quarter.

The same for revenues stands at $3.58 billion, suggesting growth of 10.5% from the prior-year quarter.

Let’s take a look at how things are shaping up prior to this announcement.

Stryker Corporation Price and EPS Surprise
 

Stryker Corporation Price and EPS Surprise

Stryker Corporation price-eps-surprise | Stryker Corporation Quote

MedSurg in Focus

This segment consists of surgical instruments plus endoscopic and emergency medical equipment. Notably, it has been consistently driving Stryker’s top line, a trend that is likely to have continued in the third quarter.

Notably, the Zacks Consensus Estimate for the segment’s revenues for the third quarter stands at $1.58 billion, up 9.6% year over year.

MedSurg has three subsegments — Endoscopy, Instruments and Medical.

Growth across its aforementioned three subsegments is likely to have benefited MedSurg’s third-quarter performance. The segment is anticipated to have witnessed considerable worldwide organic growth in the to-be-reported quarter on better-than-expected performance at instruments.

Other Factors at Play

The company’s third-quarter performance is likely to reflect broad-based strength across its divisions and regions. In fact, robust performance in emerging markets and Europe is expected to get reflected in the upcoming quarterly results. This is reflected in the third-quarter earnings projection wherein the adjusted EPS is estimated between $1.87 and $1.92 per share. Further, sales growth at the high-end of MedTech is likely to have contributed to the third-quarter bottom line.

Further, the company’s Orthopaedics segment is likely to have witnessed strong organic growth on the back of solid performance at the Knee sub segment. Moreover, sustained strong demand for Mako TKA (Total Knee Arthoplasty) platform or cementless knee and other 3D printed products is anticipated to get reflected in the segment’s third-quarter performance. For the quarter to be reported, the Zacks Consensus Estimate for this segment’s sales is pegged at $1.24 billion, indicating a year-over-year improvement of 6.1%.

With respect to Neurotechnology & Spine segment, a bankable performance within the NeuroTech product lines and the K2M buyout is likely to have contributed to the company’s third-quarter performance. Moreover, sustained solid demand in Europe, China and Japan might have impacted segmental growth, internationally. For the upcoming quarterly announcement, the Zacks Consensus Estimate for the segment’s sales stands at $758 million, suggesting year-over-year growth of 20.7%.

The company remains on track to achieve its full-year target of 30 to 50 basis points operating margin expansion backed by the top line and continued progress in cost transformation growth initiatives, a trend is likely to have continued in the third quarter.

However, probable high debt and unfavorable pricing is likely to have affected Stryker’s top line in the third quarter.

Here’s What the Quantitative Model Suggests

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is not the case here as you will see below.
 
Earnings ESP: Stryker has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Stryker carries a Zacks Rank #2.  

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

AmerisourceBergen Corporation ABC has an Earnings ESP of +0.55% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.50% and a Zacks Rank #3.

Henry Schein, Inc. HSIC has an Earnings ESP of +0.87% and a Zacks Rank #3.

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Stryker Corporation (SYK) : Free Stock Analysis Report
 
Henry Schein, Inc. (HSIC) : Free Stock Analysis Report
 
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