Stryker's sales jump after string of M&A deals

Stryker CEO Kevin Lobo

Stryker's ($SYK) net sales grew by 5.3% in the first quarter of 2014 compared to the prior to $2.3 billion.

The reconstructive unit reported sales of $999 million and grew by 4.5%, while medsurg reported 5.8% growth to $886 million and neurotechnology and spine grew by 5.9% to $420 million. Currency fluctuations reduced sales growth by at least one percentage point in all three divisions, according to the earnings release.

During the quarter, the company completed two large acquisitions and closed on another. It acquired Pivot Medical to bulk up in sports medicine, especially minimally invasive hip surgery.

"So, for three or four years, we weren't ready to really compete vigorously in sports medicine, because we didn't have a complete offering, but we are now ready," said Stryker CEO Kevin Lobo, according to a Seeking Alpha earnings call transcript. Interestingly, the company is a potential buyer of devicemaker Conmed, which has an attractive orthopedics and sports medicine line.

In addition, the company acquired surgical infrastructure equipment company Berchtold Holding and closed on the acquisition of Patient Safety Technologies during the quarter.

In other acquisition-related news, Lobo said the company's reconstructive unit will benefit from the integration of the sales force of Mako Surgical, which Stryker acquired in December 2013. Lobo said the merger challenged the company's sales force initially, but it is now unified.

Company officials also said harsh weather resulted in postponed reconstructive surgeries, but predicted that they will be reschedule for later this year.

Stryker's spine sales totaled $177 million in the quarter, an increase of less than 1%. But Lobo said the arena is "a focus area for us certainly with our internal R&D organization and we'd certainly be open for looking at acquisitions within Spine." In fact, in what Lobo described as a "very small" Q1 transaction, Stryker purchased CoAlign Innovations, manufacturer of implants for lower lumbar procedures.

International sales grew 1.8% (5.2% on a constant currency basis) to $763 million. Lobo said the company's turnaround plans in Europe remain on track: "Europe was a sour spot to go back about a year-and-a-half for Stryker, and it has been over a number of quarters trailing the market, and we launched our turnaround and we've now had four straight quarters of low single-digit growth," he said.

- read the release
- here's the Seeking Alpha transcript

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