Overview of Stryker’s 2024 Performance

Stryker Corporation, a global leader in medical technologies, reported strong financial results in 2024. The company achieved reported net sales growth of 10.2%, with sales growing 10.7% in constant currency. Stryker reported net earnings of $2,993 million and net earnings per diluted share of $7.76. Excluding the impact of certain items, the company achieved adjusted net earnings of $4,700 million and adjusted net earnings per diluted share of $12.19, representing growth of 15.0%.

The company continued to execute on its capital allocation strategy, investing $1,628 million in acquisitions and paying $1,219 million in dividends to shareholders. Stryker also refinanced a portion of its debt, repaying $600 million in senior unsecured notes and issuing $3,750 million in new senior unsecured notes.

Segment Performance

Stryker’s business is organized into two segments: MedSurg and Neurotechnology, and Orthopaedics.

MedSurg and Neurotechnology Segment The MedSurg and Neurotechnology segment reported net sales of $13,518 million in 2024, an increase of 11.1% as reported and 11.6% in constant currency. The segment’s operating income as a percentage of net sales increased to 29.6% in 2024 from 28.5% in 2023, driven by higher unit volumes, higher prices, and a decrease in selling, general, and administrative expenses as a percentage of sales.

Orthopaedics Segment The Orthopaedics segment reported net sales of $9,077 million in 2024, an increase of 8.9% as reported and 9.4% in constant currency. The segment’s operating income as a percentage of net sales increased to 28.5% in 2024 from 27.2% in 2023, primarily due to higher unit volumes and a decrease in selling, general, and administrative expenses as a percentage of sales.

Gross Profit and Operating Expenses Gross profit as a percentage of net sales increased to 63.9% in 2024 from 63.7% in 2023, driven by higher sales pricing and favorable volume, partially offset by higher manufacturing and supply chain costs.

Research, development, and engineering expenses as a percentage of net sales decreased to 6.5% in 2024 from 6.8% in 2023, primarily due to lower spending on medical device regulations in the European Union.

Selling, general, and administrative expenses as a percentage of net sales decreased to 34.0% in 2024 from 34.7% in 2023, primarily due to continued spend discipline and lower charges for structural optimization and certain legal matters, partially offset by higher acquisition-related costs.

Goodwill and Other Impairments In 2024, Stryker recorded a goodwill impairment charge of $456 million related to its Spine business. The company also recognized an estimated loss of $362 million as a result of classifying certain assets in the Spinal Implants business as held for sale.

The Spine business’s operating results continue to be affected by inflationary pressures and the competitive environment. As a result of these factors, Stryker performed a quantitative impairment test of the Spine reporting unit at October 31, 2024, which indicated that goodwill was impaired. The company then evaluated the recoverability of the underlying asset groups and determined that the Spinal Implants asset group required further evaluation.

A recoverability test was performed on the Spinal Implants asset group, and it was determined that the undiscounted cash flows of the asset group exceeded its net carrying amount by over 80%. However, the quantitative goodwill impairment test concluded that the Spine reporting unit’s carrying amount was in excess of its estimated fair value, and Stryker recognized a goodwill impairment charge of $273 million.

In the fourth quarter of 2024, Stryker committed to a plan to sell certain assets associated with the Spinal Implants business. Goodwill allocated to the disposal group was tested for impairment, resulting in an impairment charge of $183 million. The company then compared the carrying amount of the disposal group to the fair value less cost to sell, recognizing an estimated loss of $362 million.

Income Taxes Stryker’s effective tax rate was 14.3% in 2024, compared to 13.8% in 2023. The increase in the effective tax rate was primarily due to the 2023 tax effect related to transfers of intellectual property between tax jurisdictions, partially offset by the 2024 deferred tax benefit on the outside basis difference related to the anticipated sale of the Spinal Implants business.

The company operates in multiple jurisdictions with complex tax policies and regulatory environments, and it may take tax positions that are subject to successful challenge by the applicable taxing authorities. Stryker evaluates its tax positions and establishes liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes.

Liquidity and Capital Resources Stryker’s financial condition remains strong, as evidenced by its ability to generate substantial cash from operations and access capital markets at competitive rates. The company’s cash, cash equivalents, and marketable securities totaled $3,743 million at the end of 2024, and its current assets exceeded current liabilities by $7,231 million.

In 2024, Stryker generated $4,242 million in cash from operating activities, an increase from $3,711 million in 2023. The company used $3,000 million in cash for investing activities, primarily for acquisitions and purchases of short-term investments, and $525 million in cash for financing activities, including dividend payments and debt repayments.

Stryker maintains debt levels that it considers appropriate after evaluating factors such as cash requirements for ongoing operations, investment and financing plans, and the overall cost of capital. In 2024, the company repaid $600 million in senior unsecured notes and issued $3,750 million in new senior unsecured notes.

Outlook and Risks Stryker’s goal is to achieve sales growth at the high-end of the medical technology industry and maintain its long-term capital allocation strategy that prioritizes acquisitions, dividends, and share repurchases.

However, the company faces several risks and uncertainties that could impact its future performance. These include:

1. Regulatory and Legal Matters: Stryker operates in a complex regulatory environment and may be subject to successful challenges by taxing authorities or legal matters that could have a material adverse effect on its financial position, results of operations, and cash flows.

2. Goodwill and Intangible Asset Impairments: The company’s goodwill and intangible asset impairment assessments rely on significant judgments, assumptions, and estimates that are susceptible to change. Future changes in these factors could result in significant impairment charges.

3. Macroeconomic Conditions: Stryker’s performance could be affected by changes in global economic conditions, including inflation, interest rates, and foreign currency exchange rates.

4. Competitive Environment: The medical technology industry is highly competitive, and Stryker’s ability to maintain its market share and profitability could be impacted by the actions of its competitors.

5. Supply Chain Disruptions: Disruptions in the company’s supply chain, including the availability and cost of raw materials and components, could adversely affect its ability to manufacture and sell its products.

Overall, Stryker’s 2024 financial performance demonstrates the strength of its diversified business model and its ability to navigate a challenging operating environment. The company’s focus on innovation, operational excellence, and strategic capital allocation positions it well for continued success in the future, though it must remain vigilant in managing the risks and uncertainties that come with operating in the dynamic medical technology industry.