The Hips Don't Lie: Stryker Sees Continued Growth in Hips and Knees

Stryker recently reported strong quarterly results, especially in hips and knees. But, as one analyst pointed out during the company’s earnings call, investors may be skeptical about the sustainability of that growth.

The company’s knee business grew 8.4% in the U.S. market, and 17.4% outside the U.S. (excluding foreign exchange impact) while the hip business grew 10.9% in the U.S. market and 25.3% outside the U.S. (excluding foreign exchange impact).

“One of the things that I think investors struggle with is, when they see this kind of growth in ortho, an impression that this is not sustainable and either at some level of pent-up demand and volume, or pricing that is moved positively that may not remain positively,” said Joanne Wuensch, a healthcare research analyst at Citi, during the company’s October 29 earnings call. “Can you please address that? Tell me why it's right or wrong.”

Stryker CEO Kevin Lobo was quick to explain why he expects this level of growth to be the “new normal.”

“I don't know how many quarters it takes for you to start to believe that it's going to be a good market. This has been going on for some time now; I think obviously [investors have] potentially long memories,” Lobo said. “But we've called the market up more than a year ago. We said that we expected this to be an elevated market just based on looking at surgery schedules and the level of activity and the aging demographics and the great outcomes from these procedures.”

That said, no one has a crystal ball to predict exactly how the market will evolve, he acknowledged.

“But all signs and signals are pointing to this being kind of like a new normal ... And of course, we're achieving a higher growth rate just based on our innovation and our sales execution. So, to me, I'm not surprised to see these kinds of numbers.”

Stryker CFO Glenn Boehnlein commented on the analyst’s mention of pricing.

“We have a very big focus on these contracts as they're coming up and the negotiations related to those contracts,” he said. “And we're seeing the results. We're seeing that, okay, we're not always getting into positive territory on orthopedics, but we are seeing less negative than we had seen before. And so, I don't see that focus going away anytime soon.”