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Stryker Corporation (SYK), Johnson & Johnson (JNJ): Earnings Pain Intensifies in the Medical-Device Industry

Earnings season hasn’t been kind to medical-device makers so far. Leading firms in the industry produced mixed results last week, with cardiovascular products in particular crimping sales across the market, despite rising net income at numerous companies. Earnings struck again Wednesday, with net income falling at both orthopedics player Stryker Corporation (NYSE:SYK) and heart-product maker Edwards Lifesciences Corp (NYSE:EW).

While Stryker Corporation (NYSE:SYK)’s earnings weren’t bad, Edwards Lifesciences Corp (NYSE:EW) took a beating because of its disappointing outlook — and its stock paid the price, falling cataclysmically on Wednesday. Let’s look at what you need to know from this latest round of earnings reports.

Stryker Corporation (NYSE:SYK)Stryker won’t strike out
Starting off with Stryker Corporation (NYSE:SYK), the company reported earnings on Wednesday that fell 13% year over year for the first quarter. That loss was heavily affected by one-time items, however, particularly regarding recalls over the company’s hip implants, among other items. Adjusted earnings actually rose slightly to $1.03 per share, edging out analyst expectations of $1.01 per share. Revenue also rose at Stryker Corporation (NYSE:SYK), gaining slightly over 1% to $2.19 billion but still missing analyst projections by a hair.

Stryker Corporation (NYSE:SYK)’s Rejuvenate and ABGIII hip implant recalls last year hit earnings hard, accounting for much of the annualized loss. Hip implant recalls have been the bane of the orthopedics industry recently: Johnson & Johnson (NYSE:JNJ) , another strong player in the orthopedics market, has suffered through a public-relations mess over its ASR hip implants, and while the company won a recent lawsuit over the fiasco, it’s still facing complaints from thousands of plaintiffs.

Despite its recall woes, however, Stryker Corporation (NYSE:SYK)’s reconstructive business still posted 2.8% growth at a constant currency, and the firm’s neurotechnology and spine unit posted even stronger results. These two businesses should see solid growth in the long term, with aging and obesity trends on the orthopedics industry’s side in particular.

All in all, while earnings took a major blow from one-time items, Stryker Corporation (NYSE:SYK)’s results were a bright spot in what’s been a down season for the industry so far. The company’s revenue growth, despite pricing pressures and the impact of its recalls, bodes well for the future.

The same can’t be said for another company that reported results on Wednesday — Edwards Lifesciences Corp (NYSE:EW).

Edwards takes a dive
Edwards Lifesciences Corp (NYSE:EW) started off on the wrong foot by falling short of analyst expectations. The company did grow adjusted earnings per share by more than 30% year over year, but the EPS result of $0.72 still missed projections of $0.76. Edwards Lifesciences Corp (NYSE:EW)’s revenue of $497 million, which grew more than 8% for the quarter, also failed to impress analysts, who had expected sales of more than $518 million.

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