In the last week of March, Stryker recorded a 30 percent y-o-y sales decline, which has only accelerated further since then. The company projected an overall drop in sales revenue of about 35 to 40 percent in April.
However, compared to some of its competitors, the sales decline is relatively less steep. Boston Scientific has said that its April sales were down by about 50 percent, while Medtronic announced that its US weekly sales have come down by about 60 percent y-o-y in recent weeks.
Ortho Business is Down
The first quarter impact of Covid-19 pandemic was more pronounced in case of Stryker for hip and knee procedures. The trauma and extremities segment, which is another part of the company’s ortho division, has also been hit. That’s because fewer people are currently engaging in high-risk activities, such as working on construction sites or driving.
Major Equipment Sales to Suffer
Stryker also expects its sales volumes for large capital equipment to decrease in the near term. The company’s surgical robot sales are likely to remain low. Investing in these capital intensive products requires the hospitals to have sufficient liquidity. However, the silver lining for Stryker is that hospitals have been canceling their existing orders, but only delaying them while they wait for the elective surgery procedures to resume.
MedSurg Division doing Better
The largest division at Stryker, MedSurg, seems to be somewhat better positioned than others during the Covid-19 pandemic. The reduction in US sales volumes in MedSurg has been about 25 percent in April, which is relatively less sharp decline. While the division faces muted demand for its endoscopy line of products, it is witnessing strong sales in stretchers, beds, and emergency care equipment.
“Hold” Rating by Jefferies
Looking at the short term prospects of Stryker’s business, Jefferies has maintained a “Hold” rating for the company. However, it remains to be seen how 2021 turns out for medtech companies such as Stryker. It could go either way as the number of surgeries may increase due to pent up demand, but if the macro economy slows down, the elective procedures may continue to decline.
Jefferies analyst Raj Denhoy noted that they are taking a middle ground about Stryker’s prospects as of now. The next few months are going to be a roller coaster ride, considering that elective procedures constitute a substantial part of the company’s business.
No Guidance from the Company
On March 31st, Stryker withdrew its early financial guidance that had estimated organic sales volumes to grow anywhere from 6.5% to 7.5%. During its latest earnings call, the company has refused to provide financial guidance for the new second quarter or even for the full year.