Stryker Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Marcus Robert - JPMorgan - Analyst : Great. Thanks for taking the questions. Congrats on a really nice quarter. I'm sure this was a really fun few weeks for you, Preston, with all that's going on. And maybe we could start there on tariffs. You're absorbing the entire impact, $200 million. How should we think about where that absorption is coming from? What's your ability to mitigate as much as possible? And how should we think about the exit rate into next year versus those mitigation efforts?

Question: Marcus Robert - JPMorgan - Analyst : Great. Maybe a quick follow-up, Orthopaedics, that had been running a little bit more in line with estimates the past few quarters. You had a great beat. Here, we've seen three of the four main competitors report. I would say, two of those, including you, have been really good results, one, a little less so. What are you seeing in terms of the ortho market, the sustainability of the growth and just the current environment here in your positioning?

Question: Larry Biegelsen - Wells Fargo Securities - Analyst : Good afternoon. Thanks for taking the question. I'll echo my congratulations on a really impressive quarter here. 10% organic growth in Q1, Kevin, with one less selling day, so closer to 11% underlying. The guidance of 8.5% to 9% -- 8.5% to 9.5%, I'm sorry, or 9% at the midpoint, implies slightly slower growth Q2 through Q4. So just talk about the environment beyond Orthopaedics that you addressed in the last question and your momentum. Is there anything you're seeing that concerns you? And I had one follow-up.

Question: Larry Biegelsen - Wells Fargo Securities - Analyst : All right. That's super helpful. And Preston, the gross margin was really strong this quarter. Talk about how to think about the rest of the year for the gross and operating margin because I assume the tariffs are going to hit the gross margin probably third and fourth quarter. Any color you can help provide on just kind of the cadence of margins to help reach that operating margin year-over-year of 100 basis points improvement that Kevin talked about would be helpful.

Question: Joanne Wuensch - Citi - Analyst : Good evening. Thank you for taking the question, very nice quarter. I'll put both of mine upfront. CapEx environment is a question we've been asking most management teams throughout the season, both in the US and outside the United States. I'd love to see what you're thinking about that. And then also with Inari close now, I think, for two months, what are you seeing with that? Is it going according to plan? Any surprises, positive, negative you can share?

Question: Ryan Zimmerman - BTIG - Analyst : Yeah. Thank you. Let me echo the congrats on a strong quarter. I want to ask about the OUS hip number. It was pretty good, to say the least, and it stands out amongst the broader market. I'm kind of wondering what we should think about the durability of that segment given how well it's going outside the US for the past really four quarters now.

Question: Ryan Zimmerman - BTIG - Analyst : Okay. Very helpful, Kevin. And then turning to Trauma and Extremities, I'm wondering if you could unpack that a little bit because that has also been strong. I mean you have the, Pangea plating system. But is there anything in there, particularly in the extremities line, that we should think about in terms of the momentum you're seeing in that segment?

Question: Travis Steed - BofA Global Research - Analyst : Hey, congrats on the good quarter. Just one more tariff follow-up question. A couple of things I was going to ask. On the $200 million, curious how much of that's being offset by currency? Any details on kind of how much of that exposure is by country? What the impact would be if the 90-day pause doesn't stick and kind of goes back to the higher rates? And how do think about 2026, it's good to annualize that? Or if you've got extra offsets in 2026 that you think you can pull? And I know I was going to ask about exemptions too. I know you guys have a lot of close relationships with AdvaMed. So curious how those discussions are going for any assumptions for medical devices.

Question: Travis Steed - BofA Global Research - Analyst : Great. I'll stick to the one since it was a long one.

Question: Vijay Kumar - Evercore ISI - Analyst : Hey, guys. Congrats on an excellent hearing that. Thanks for the questions. If you could just comment on cadence of margins, how should we think about progression? And I'm assuming tariff is mostly a back half impact in that $200 million, is this China versus Europe? Or what proportion is China versus ex-China would be helpful.

Question: Vijay Kumar - Evercore ISI - Analyst : Understood. And Kevin, maybe one for you on the Medical side. Any comments on how LP 35 launch is going? I think in the past, you've commented about share gains. Curious on opportunity that you're seeing within Medical?

Question: David Roman - Goldman Sachs - Analyst : Thanks, pricing environment. Obviously, that's something that, coming into the year, you had contemplated not realizing the same level of benefits that you accrued in 2024. Can you just talk to us about what has evolved over the course of the year? And just to clarify, this is pure price, not the impact of new product momentum?

Question: David Roman - Goldman Sachs - Analyst : Okay. And then maybe just on Pangea, it sounds like you're moving relatively quickly towards full market release. I think at AOS, you talked about having inventory available to some subsegment of the sales force. On this call, you're introducing geographic expansion. It sounds like you're getting very close fully hitting an inflection on that rollout. How should we think about kind of maybe what's transpired here in the past 1.5 months or so since AOS and where you are in that US and OUS rollout?

Question: Philip Chickering - Deutsche Bank - Analyst : Hey, good afternoon, guys. And thanks for taking my questions. Another sort of tariff question here. Looking at the inventory days, you guys run about 7 months. So just looking at the timing of the tariffs, would the tariffs be fully impacting your run rate by the fourth quarter? Or will we not see that until the first quarter of '26?

Question: Philip Chickering - Deutsche Bank - Analyst : Okay. Great. And then looking at the other Ortho category, it looked to be flat year-over-year on the revenue side. We talked about record Mako placements. And just more reflective of customers switching to leases versus purchases. And there's any read through there on how hospitals are viewing CapEx purchases today versus buying if they're more cautious on the CapEx environment.

Question: Philip Chickering - Deutsche Bank - Analyst : Great. And Preston, it's great to have you back on the call.

Question: Matthew Miksic - Barclays - Analyst : Thanks so much for taking the question Apologies, we're all juggling a number of calls right now. But wondering if you could talk a little bit about any of the conversations you're having with hospitals about budgets, if that's an issue, or started to come out and how you're thinking about that. And then also just a comment on Shoulders. I know you mentioned the shoulder robot early in the call, but maybe what is driving your growth there? What has been, just kind of walk us through. Where has the strength been? How do you expect that to continue as you kind of move through the interim launch?

Question: Patrick Wood - Morgan Stanley - Analyst : Beautiful. Thanks so much for taking the question, guys. I'll just ask them both upfront, if I can. I'd love if you could unpack a little bit more on the Endoscopy side of things. I know you talked about sports med and visualization outside, but any extra details there would be awesome. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, SYK.N - Q1 2025 Stryker Corp Earnings Call And then the second one, just to riff on Shoulder again. Just like any extra details you've got on, I know you're a limited release on Mako Shoulder, but just feedback you've been having, how you think about that when we move into '26? And is that a more or less meaningful addition than, say, what we saw Mako do with knee and then hip?

Question: Shagun Singh - RBC Capital Markets - Analyst : So two quick ones for me. On international, you indicated that it could be a significant catalyst for future growth. I'm wondering if you can elaborate on that in terms of just mix of growth expectations? And then the second question is just on operating margins. Obviously, you guys are doing a great job, and you've elaborated on it. But can you share any long-term expectations on where we could see gross margins and operating margins go? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, SYK.N - Q1 2025 Stryker Corp Earnings Call

Question: Michael Matson - Needham & Company Inc - Analyst : Yes. So with the update to the revenue guidance, sorry, the organic revenue guidance specifically, you're calling out a slightly unfavorable foreign exchange impact. Can you maybe explain what that means? Because I guess I thought that this was constant currency growth?

Question: Michael Matson - Needham & Company Inc - Analyst : Okay. Got it. All right. And then just with the Spine divestiture, I don't know if you guys are willing to disclose how much you got for that business? I assume we'll see something in the second quarter cash flow statement. But -- if maybe you could tell us how much they -- VB paid and what you're doing with the proceeds I assume, repaying debt, but let me know if that's not right. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, SYK.N - Q1 2025 Stryker Corp Earnings Call

Question: Caitlin Cronin - Canaccord Genuity - Analyst : Congrats on another great quarter. I'll just ask both of my questions upfront. So I think you noted earlier in the call that the tuck-in acquisitions you made last year were going well. Just any more color on those? And also with continued strong Ortho performance, anything to really take away from that and how you're performing in the ASP?

Question: Danielle Antalffy - UBS - Analyst : Congrats on a good start to the year. I know the capital equipment question has been beaten to death here. So I'm going to actually ask it a little bit of a different way, I think. And I think one of the lingering questions is will we go into a recession? I mean I think it depends on the day of the week as to what the outlook might look like. But I'm just curious if you guys could talk about how recession-proof or not or where you see the most exposure to your businesses? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, SYK.N - Q1 2025 Stryker Corp Earnings Call And the follow-up I'll just ask now on the capital equipment side. From my perspective, where I've been a little concerned is less about the capital budget number and more about sort of a paralysis as hospitals wait to see what happens with any budget, Medicare -- changes to Medicare or things like that. And it sounds like you're not seeing anything change there, but just curious if you could comment on that.

Question: Matthew Taylor - Jefferies - Analyst : I'll just ask one kind of conceptual question about tariffs. So I was wondering, if we woke up tomorrow and the tariffs were gone, maybe theoretically had this $200 million back or some function of that, can you talk about how much you would put back into the business versus what would drop through to the bottom line? I just want to understand that a little bit better as we may see things change again and again.