Stryker Corp Q4 2024 Earnings Call Summary

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

Question: Larry Biegelsen - Wells Fargo Securities, LLC - Analyst : Congrats on the strong finish to the year. Kevin, I just wanted to start on the spine sale. Just -- and first, also, congratulations to both Glenn and Preston. So Kevin, on the spine sale, just talk about why this was the right time? How much of that $700 million is going to BB, just the economics of the deal, sale price and how you're offsetting any dilution from the deal? And I had one follow-up.

Question: Larry Biegelsen - Wells Fargo Securities, LLC - Analyst : And then just a follow-up on Inari, maybe for Andy or for Glenn. Just talk about maybe some of the deal assumptions. By our math, the return on invested capital seems relatively low in year five. How do you see ROIC in five years? And when does this deal turn accretive?

Question: Robert Marcus - JPMorgan - Analyst : Congratulations on a really nice quarter. Glenn, we wish you the best in retirement. It was great working with you. Maybe a follow-up on Larry's questions and ask another way, and this is more of a P&L focus. It's really impressive that you could sell probably one of your lowest growth businesses and still be able to absorb it in the existing range that people expected and the guidance you provided on operating margins. So maybe just -- we got a good look at where your margin structure was and how you were planning to get there at the Analyst Day a little over a year ago. But as you sit here today, and there's a lot of moving pieces from that time to today, what is it that helps you get that 100-plus basis points expansion this year before Inari dilution? And what's still left to go afterwards? And any color into the building blocks would be really helpful.

Question: Robert Marcus - JPMorgan - Analyst : Great. Maybe a follow-up. If I had some my takeaways coming out of our health care conference as it relates to your business from your competitors. So is that the ortho markets remain healthy and stable, volumes are robust, less negative pricing and capital equipment markets remain healthy around the world. I wanted to see if you agree with that outlook. You always have great insights and any other color if there's a difference in geography that you want to add? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 9:30PM, SYK.N - Q4 2024 Stryker Corp Earnings Call

Question: Travis Steed - BofA Global Research - Analyst : Congrats, Preston. I look forward to working with you again. I wanted to ask about kind of the M&A. You guys used to have kind of five things on the list and kind of checked one of those off of Inari. So maybe kind of talk about, Kevin, some of your new prioritized list of like focus areas for M&A. And is this going to be a period of kind of digestion or is this going to be a period of continued M&A? And I assume that some of the proceeds in the client business will help pay down debt. So you can kind of get back on the offense on M&A sooner if that's the right?

Question: Travis Steed - BofA Global Research - Analyst : Great. And I wanted to ask on the revenue guidance of 7% to 9% there, kind of another year of above normal growth. And I guess five years now above normal growth, it's probably kind of a new normal of higher growth. And so I wanted to think about like the sustainability of this kind of higher revenue, you gotten LIFEPAK going and several of the pipeline products. So just kind of talk about the sustainability of this growth rate that you've gotten and the confidence in the revenue guidance for 2025.

Question: David Roman - Goldman Sachs - Analyst : I want to just follow up maybe on a couple of strategic questions here. I think on the last call, you had cited that the acquisitions you completed in 2024 were expected to contribute about $300 million this year. Can you maybe just give us an update on how that's progressing? How you're thinking about commercial strategy there? And any updates that you serve have observed since you've been able to close these deals?

Question: David Roman - Goldman Sachs - Analyst : And then maybe just a follow-up on the Mako Shoulder rollout. I think as your competitor is also coming out with the robotic shoulder solution as described similarly a measured and gradual rollout. Maybe you could just help us understand some of the dynamics in the shoulder market, how we should think about the addressable market here? The pace of adoption if knees, hips was a good proxy? And how the robotic shoulder market should kind of evolve in your view over the next maybe one to three years?

Question: Pito Chickering - Deutsche Bank - Analyst : Glenn, thanks for all the years in press and looking forward to working with you again. On spine divestitures, like I know the there's no color here on the economics around this transaction. But from a modeling perspective, with the deal closed in the first half of the year, how should we think about EPS seasonality this year? Does the transaction change the normal EPS seasonality Stryker?

Question: Pito Chickering - Deutsche Bank - Analyst : All right. Great. And then in '24, Medical had a huge year, does never get to the near time as the other divisions. How should we think about growth there for 2025? And sort of what are the big growth drivers in medical for this year?

Question: Vijay Kumar - Evercore ISI - Analyst : Glenn, wishing you the best, and Preston, congratulations, well deserve. I guess my first question and just a guidance clarification. Inari is the maximum dilution impacts your 20 basis points, Glenn, is that what you're saying? And spine, I think the comment you made was spine will be absorbed in the current guidance does mean the EPS of $13.45 to $13.70 that's intact given that Spine?

Question: Vijay Kumar - Evercore ISI - Analyst : Understood. And then maybe one related question here on -- with fine below corporate margin, is that sort of aiding margins here? Inari, Kevin, this is a fairly good deal close time. Sometimes we do have sales force disruption when deals were announced. But given the fairly quick turnaround time, I'm assuming that should be minimal here. Is that a fair assumption? And how do you guys get comfortable? I know there was some noise around a DOJ investigation. If you could just clarify on how you got comfortable that it would be helpful.

Question: Matthew O'Brien - Piper Sandler Companies - Analyst : Maybe this one is for Andy specifically. But just based on my math of the $560 million, thinking about the annual contribution from Inari, it looks like it's about $670 million. So roughly about $40 million, $50 million of lost sales, I think that you're factoring in versus what -- the Street had been modeling. So that's about 11% growth. So kind of well below market. Andy, do you think you can get this business back to market growth? Or do you need to full in other technologies to be able to do that type of growth in the future, be it aspiration, et cetera? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 9:30PM, SYK.N - Q4 2024 Stryker Corp Earnings Call

Question: Matthew O'Brien - Piper Sandler Companies - Analyst : Got it. Got it. I'll do math one of these days. And then, Kevin, for you specifically, I know it's early in the year, but just the top line guide of 8% to 9%. And you're trying to be, I'm sure somewhat conservative, but just getting even to the low end of that range, just given the momentum in trauma and extremities looks unbelievably good. Medical, you just talked about double digits well above average on the new side of things. I just guess what would get you down to the 8%-ish range versus midpoint or even higher, just given, again, all the momentum that we see in the business?

Question: Shagun Singh - RBC Capital Markets - Analyst : Congratulations to both Glenn and Preston here. I was just wondering if we should expect any shift in priorities given this transition. And then, Kevin, a question for you on the LRP. Your algorithm growth algorithm has been 5% weighted average market growth, but another 200 to 300 basis points of outperformance, gets you to 7%. You have exceeded those levels in recent years, including 2024. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 9:30PM, SYK.N - Q4 2024 Stryker Corp Earnings Call How -- and you've made some deals here as well. So how should we think about that weighted average market growth going forward? And then just similarly on margins, you guys had previously said at least 30 basis points annually beyond 2025, how do you think about peak levels?

Question: Matthew Miksic - Barclays - Analyst : Great. And congrats to everyone who's moving in and out of interest looking forward to working with you again as everyone said. I know the conversation has been around spine. There are a ton of questions. I don't think anybody saw this coming, but it does make a lot of sense for what it's worth. I just had one question maybe around some of the other businesses that have been doing so well with many product launches that we spent a good part of the last year talking about. So camera, defibrillator, even things like, I don't know, powered instruments and base management. Just the basic question is, these are all punching kind of above double digits. How many -- maybe if you could dig through any of them that are going to start to kind of hit the other side of these refresh and product cycle by the end of the year? Or do all these carry into '26? Any kind of color you could give on sustainability would be great. Then I have one quick follow-up.

Question: Matthew Miksic - Barclays - Analyst : Great. And then just a quick follow-up on the Shoulder. I know focus on the robot as being an important catalyst here and one of your competitors is out there wrong. Could you give us a sense is not just the implants and the robot, right? I mean there's a fair amount of other enabling technology. If you could give us a sense of maybe how that's contributing to growth with the uptake or adoption has been like there? And what other enabling technology solutions besides the robot you see as contributing to growth for Shoulder in the next day, I don't know, 12 weeks a month?

Question: Michael Matson - Needham & Company Inc. - Analyst : So with the spine divestiture, just wanted to ask about how the Mako and enabling technologies will sort of work? I know one of your competitors try to be something similar when they spun out their buying business, and it didn't really seem to work in the end. Is there still the same type of revenue opportunity here from the Mako spine robot?

Question: Michael Matson - Needham & Company Inc. - Analyst : Okay. Got it. And then just in terms of -- I know you mean that you've got a plant in Mexico. There's talk of potential tariffs on Mexico and Canada. So how much of your manufacturing is coming from either of those two countries? And how much flexibility do you have to move production elsewhere if we do end up seeing some tariffs there this weekend?

Question: Caitlin Cronin - Canaccord Genuity - Analyst : Congrats on a great quarter and congrats to Glenn and Preston as well. I guess just to start off, with these new Mako launches in spine and shoulder, have you seen any momentum increased interest from hospitals and SC the excitement of just having one-stop shop for the Mako solution, as you kind of touched on before?

Question: Caitlin Cronin - Canaccord Genuity - Analyst : Got it. And then just a strong extremities number. You didn't really mention Foot & Ankle in the commentary. How did that business far into Q4? And any commentary on the market environment going into 2025?

Question: Richard Newitter - Truist Securities - Analyst : Congrats, Preston and good luck, Glenn. Just going back to the CapEx environment question, I think someone asked earlier. I'm just curious you guys obviously have great insight into conversations at the hospital C-suite level. Just with all the rhetoric going on out there about potential health care policy changes coming, some of the uncertainty that must be brewing with some of your customers. I'm just curious, are you starting to see maybe in the 2025 fiscal years and budget. But are there any behavior changes that are going on? Or how are your customers, if at all, expressing any potential emerging anxiety? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 9:30PM, SYK.N - Q4 2024 Stryker Corp Earnings Call

Question: Richard Newitter - Truist Securities - Analyst : Okay. That's very encouraging to hear. And maybe just one more Inari in the process. We all had access to the proxy, and I think I read it right, but it looked like the -- it looked like you guys got access to the financials and whatnot in early December. It feels like a pretty quick turnaround to diligence, I guess, one, is that -- was I reading that right? And can you give any color on how much work had been done prior to that? Or how you got comfortable with the diligence on this end market and the company so fast?

Question: Joshua Jennings - TD Cowen - Analyst : Congrats to Glenn and Preston. Kevin, I was hoping to just touch on the continued kind of build-out of the ASC infrastructure in the US, it's been a tailwind Stryker is best positioned. I think most think about procedure volume increases as being the biggest boost, but many of your businesses are levered to this continuing year-over-year of increase in the number of ASCs in the US. So I guess the question is really one, what inning are we in, in this ASC infrastructure buildout in the US? And two, can you just help us think about which business is because I think there are a lot, maybe it's too long to answer, but that are benefiting from this tailwind? And how long do you expect this to last?

Question: Joshua Jennings - TD Cowen - Analyst : Appreciate that. And then just a follow-up on the answer to the acquisition strategy post Inari, getting that weighted average market growth rate higher there are many high-growth cardiovascular segments, and you're now in peripheral vascular. Should we consider this kind of initial breast into in the peripheral vascular kind of opening the door to other high-growth cardiovascular sectors as well for Stryker?

Question: Danielle Antalffy - UBS Equities - Analyst : And Glenn, congrats to you, enjoy retirement. Preston, really looking forward working with you again. Just a question on R&D and productivity there. I mean you saw a pretty healthy growth in R&D in 2024. I mean this plays into the super cycle of new products you have, and it also helps on the pricing front. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 9:30PM, SYK.N - Q4 2024 Stryker Corp Earnings Call I mean, how do we think about R&D spend going forward? I appreciate you guys for 2025 has given some goalpost there. But -- just at a high level and what you're seeing from an R&D productivity perspective and really how the focus might be changing there, if at all, to ensure you continue to get at least some modest price benefit and sustain this level of growth based on what is a very steady cadence of new product launches?

Question: Michael Polark - Wolfe Research - Analyst : I just have one final follow-up on the guidance, the organic revenue growth guidance as it relates to the Spine. So I just want to be very clear, the full year for the full company has guided 8% to 9% you're saying, that includes Spine, which is doing math, assuming the 1H closed, it's kind of 150 to 250 basis points of impact. So if I look at the 8.5%, plus 2 (inaudible) is as real kind of RemainCo organic revenue growth guidance for '25?