Stryker Corp (SYK) Q4 2018 Earnings Conference Call Transcript

Stryker Corp  (SYK 0.58%)
Q4 2018 Earnings Conference Call
Jan. 29, 2019, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants
  
  See all our earnings call transcripts.

Prepared Remarks:

Operator

Welcome to the Fourth Quarter 2018 Stryker Earnings Call. My name is Josh, and I will be your operator for today's call. At this time all participants are in a listen-only mode. Following the conference, we will conduct a question-and-answer session. (Operator Instructions) This conference is being recorded for replay purposes.

Before we begin, I would like to remind you that the discussions during this conference call will include forward looking statements. Factors that could cause actual results to differ materially are discussed in the company's most recent filings with the SEC.

Also, the discussions will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release that is an exhibit to Stryker's current report on Form 8-K filed today with the SEC.

I will now turn the call over to Mr. Kevin Lobo, Chairman and Chief Executive Officer. You may proceed, sir.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Welcome to Stryker's fourth quarter earnings call. Joining me today are Glenn Boehnlein, Stryker's CFO; and Katherine Owen, VP of Strategy and Investor Relations.

For today's call, I'll provide opening comments followed by Katherine with an update on MAKO and our recently completed acquisition of K2M. Glenn will then provide additional details regarding our quarterly results, before we open the call to Q&A.

2018 was a stellar year for Stryker. Following tough comparisons from a successful 2017, we delivered impressive organic sales growth and leveraged adjusted earnings gains. Our talented team has launched new products, drove sales and marketing execution, and benefited from prior acquisitions that are broadened our portfolios.

We delivered organic sales growth of 8.6% in Q4 and grew full year organic sales by nearly 8%. Importantly, this performance reflected broad-based strength across divisions and regions. MedSurg had an excellent Q4 up 10% organically as a three large divisions endoscopy, instruments, and medical grew between 9% and 12%. MedSurg results reflect strong commercial excellence, ability to steadily launch new products, and successfully integrate acquisitions.

For example the Physio-Control business within medical grew double digits in 2018. In 2019, MedSurg will have a similar flow of new products and endoscopy will launch its next generation camera, the 1688, at the end of the first quarter. Neurotechnology and Spine increased over 8% organically as neurovascular, CMF and interventional spine all registered double-digit organic growth.

We are excited about the acquisition of K2M, which meaningfully enhances our competitive position in the spine market. Orthopedics posted solid Q4 organic growth of 7% led by trauma and extremities, knees increasing momentum in hips and excellent MAKO growth which Katherine will detail shortly.

US trauma and extremities achieved a major milestone crossing $1 billion in sales for the first time in 2018, resulting from a multi-year period of terrific growth. Geographically, our Q4 growth was balanced as the US was up 8% organically while international delivered double-digit gains powered by emerging markets and Europe.

On a full year basis emerging markets grew double-digits and Europe once again grew high single-digits. When combined with strong performances in South Pacific, Japan and Canada full year international organic growth was higher than US growth.

Our focus on leveraging the strong top line was evident in Q4, as operating margin increased 30 basis points year-over-year despite significant deal dilution including K2M. Meanwhile, we continue to make meaningful investments in our sales forces and R&D to help ensure we maintain our revenue growth going forward.

Our teams remain highly focused on executing our cost transformation for growth program, which combined with our topline performance allowed us to deliver EPS at the high end of our targeted range at $2.18 a share up 11% year-over-year.

Turning to 2019. Organic sales growth is expected to be in the range of 6.5% to 7.5% representing the highest initial revenue growth guide for Stryker in a decade. Of note, we exited 2018 with a healthy order book for our capital businesses and have a similar mix of headwinds and tailwinds as we had entering last year.

While 2019 will largely be an integration year as it relates to K2M. The team is off to an impressive start with notable excitement across our combined selling organizations. And despite sizable deal related dilution, we fully expect to achieve our target 30 to 50 basis points of annual operating margin expansion. With sales growth once again expected to be at the high end of MedTech and ongoing margin expansion. We are targeting full year adjusted EPS of $8 to $8.20 a share, a year-over-year increase of 10% to 12%.

In closing I want to thank our sales, marketing, R&D and support teams around the world for their efforts and results in 2018, enabling us to deliver on our commitment to stakeholders.

With that I will now turn the call over Katherine.

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Thanks, Kevin. My comments today will provide an update on our Q4 acquisition of K2M as well as our MAKO performance. In November, we completed the acquisition of K2M for roughly $1.4 billion, which significantly bolsters our competitive position in its final market. K2M provide Stryker with a highly complementary and innovative product portfolio that is resonating with our customers and final sales force.

The teams have been focused on optimizing the integration and we are leveraging our years of deal experience to ensure we are moving quickly to align the organization. We have made considerable progress since closing including establishing the spine global senior leadership team of the combined organization. We are actively building out the remainder of the organization, which should be completed by the end of the first quarter.

Importantly, the sales leadership organizational structure has been announced along with their respective territories. The leadership team is working with the sales teams across the globe to align the sales force with our hybrid selling model, and we expect this to be completed in Q1. Additionally, the cross-selling plan related to the combined product portfolio is in its early stages and additional cross-selling progress will be made throughout the quarter.

We remain on track with our deal model and expect our combined pro forma core spinal revenue to deliver mid single-digit growth in 2019. We will provide a further update at AAOS as Eric Major, President of Stryker Spine will be participating in our booth tour and will be available for Q&A.

Turning to MAKO. We had a particularly strong performance in Q4 with 54 robots installed globally. A record level with over 40% in competitive accounts. Geographically, the US led the way with 36 robots versus 27 in the prior year. Globally, we now have 642 robots installed with 523 in the US the majority of which have been upgraded to the total knee system.

During the quarter, we certified roughly 250 surgeons on the total knee, bringing the total number of surgeons trained since launch to approximately 1,600. There were roughly 24,800 robotic procedures performed in the US during the quarter with full year MAKO procedures topping 76,900. MAKO total knee procedures increased over 35% sequentially to approximately 15,500 with knees representing roughly 60% of all MAKO procedures performed in the US in 2018. We also saw continued uptick in utilization rates on the robot, which climbed over 25% sequentially in Q4 and up 30% year-over-year. The ability to perform a cementless total knee on the robot, which was approved by the FDA in Q4 '17. It's also helping further drive cement with knee adoption as we exited 2018 with over 30% of our knees now cementless.

Combined, we believe these data underscore that MAKO is undoubtedly a powerful marketing tool for hospitals. The continued demand for the robot and steady acceleration and its utilization by surgeon is being driven more by the powerful clinical result and patient benefit.

Looking ahead to '19, we believe we are well-positioned to continue to drive MAKO momentum as we exited the year with a healthy orders pipeline for the robot. During the year, we saw strong peer review evidence that MAKO total knee delivered better clinical outcomes for patients and lower 90-day cost of care which benefits the payors.

We expect to continue to build on the clinical data and support of MAKO as we passed the two-year mark on the full commercial launch of our total knee application later this quarter. We look to further update you at the booth toward AAOS, which will include MAKO and also anticipate further clinical data to presented at August later in '19.

With that, I'll now turn the call over to Glenn.

Glenn Boehnlein -- Vice President, Chief Financial Officer

Thanks, Catherine. Today, I will focus my comments on our fourth quarter financial results and the related drivers. Our detailed financial results have been provided in today's press release. Our organic sales growth was 8.6% in the quarter, as a reminder this quarter included the same number of selling days as Q4 2017.

Pricing in the quarter was unfavorable 1.5% from the prior year, while foreign currency had an unfavorable 1.2% impact on sales. For the quarter, US sales continued to demonstrate strong momentum with organic growth of 7.8%, reflecting solid performance across our portfolio.

International sales grew 10.9% organically, which was balanced across our international regions. Organic sales growth for the year was 7.9%, which exceeded our most recently raised full year guidance of 7% to 7.5%. US organic growth was 7.5%, and the International organic growth was 8.8%. 2018 had the same number of days as 2017 and price had a 1.4% impact on sales for the full year.

Our adjusted quarterly EPS of $2.18 increased 11.2% from the prior year reflecting strong leverage on sales growth combined with good operating expense control. Our fourth quarter EPS had no significant impact from foreign exchange rates either translational or transactional which was consistent with our expectations.

Our full year EPS of $7.31 increased 12.6% reflecting strong sales growth and disciplined leverage.

Now I'll provide some highlights around our segment performance. Orthopedics delivered constant currency and organic growth of 7% including organic growth of 7% in the US. This performance was highlighted by strong performance in trauma and extremities of 7.1%. Additionally US hips grew 4%, US knees grew 5.8% and our other orthopedic business grew 44.2%.

Within the knee business, we continued to see strong demand for our MAKO total knee platform and our 3D printed products. Internationally, orthopedics delivered organic growth of 6.9%, which reflects solid performances in Europe, emerging markets and Canada. MedSurg continued to have strong growth across all businesses in the quarter with constant currency growth of 11.1% and organic gains of 10.1%, which included an 8.5% increase in the US.

Instruments had US organic sales growth of 9%. We had exceptional growth in our waste management, surg account and surgical power businesses. Endoscopy delivered US organic sales growth of 5.3% with strong performance across the sports medicine, communications and pro-care businesses.

As expected Endo's video business moderated as our customers prepare for the late Q1 launch of our next generation 1688 camera system. Of note however with the NOVADAQ video system which had robust double digit growth during the quarter. Medical had US organic growth of 12.3% reflecting solid performance in its bed, stretcher, EMS and stage businesses.

Internationally MedSurge had organic sales growth of 15.7% with strong performances in Europe, Australia and emerging markets. Neurotechnology and spine had constant currency growth of 21.4% driven by our K2M acquisition and organic growth of 8.4%. This growth reflects strong performance within our Neurotech products lines which had organic growth of 11.2%.

Our US Neurotech business posted organic growth of 7.3% for the quarter driven by strong demand for our hemorrhagic, ischemic stroke,CMF and our neuro powered instruments. We continued to be pleased with the progress of our Entellus commercial execution and integration. Our spine business saw moderate pricing pressure in the quarter offset by double digit growth of our IVS business and our titanium implant products.

We made significant progress on our integration of K2M and this will continue in 2019. Internationally, Neurotechnology and spine had organic growth of 10.6%, this performance was driven by continued strong demand in Europe, China and Japan.

Now, I will focus on operating highlights in the fourth quarter. As noted in the press release and discussed in our first quarter 2018 earnings call , the adoption of ASC 606 primarily at the impact of reclassifying certain expenses from SG&A to sale. At such all references to basis points improvements are net of this impact. You should note that for 2019 the ASC 606 reconciliation in our press release will no longer be required.

Our adjusted gross margin of 65.6% was unfavorable 55 basis points from prior year quarter. Compared to the prior year quarter, gross margin was favorably impacted by acquisitions, but offset by price, foreign exchange and business mix.

For the full year our adjusted gross margin of 66% was in line with the prior year and was primarily impacted by price and business mix. R&D spending was 5.7% of sales, which was 30 basis points lower than the prior year quarter. For the full year, R&D spending was 6.3% of sales which was 10%, 10 basis points lower than prior year.

Our adjusted SG&A was 32.4% of sales, which was favorable for the prior year quarter by 55 basis points. For the full year, our adjusted SG&A was 33.9% of sales, which was favorable for the prior year by approximately 30 basis points. For both the quarter and the year, this reflects the continued focus on operating expense improvements to our cost transformation for growth CTG program, including key projects focused on indirect purchasing and shared services.

This is offset by the negative impact of acquisitions and continued planned investments in other CTG program like our ERP project and our PLCM project. In summary, for the quarter our adjusted operating margin was 27.5% of sales which was 30 basis points favorable for the prior year quarter.

Our full year operating margin was up 40 basis points from the prior year delivering on our commitment of 30 to 50 basis points margin expansion. Our operating margin primarily reflects good leverage and continued operational savings offset by investments and acquisitions.

The latter of which had an approximately 50 basis points negative impact for the quarter and the year. Next, I will provide some highlights on other operate -- other income and expense. Net interest income and expense decreased from prior year or they are primarily due to favorable interest rates. Our fourth quarter adjusted effective tax rate of 17.6% was in line with our operating tax rate.

Our full year effective tax rate was 16.7%, which reflects benefits primarily from stock compensation expenses. We anticipate an effective tax rate of 16% to 17% in 2019, which includes the benefit from optimization of our geographical operations and stock compensation expenses. Focusing on the balance sheet. We continue to maintain a strong position with $3.7 billion of cash and marketable securities of which approximately 25% was held outside of the US. Total debt on the balance sheet was $9.9 billion, of which $1.25 billion relates to maturities that will be paid off in Q1, 2019. Upon completion of this, we anticipate total debt to be approximately $8.65 billion.

Turning to cash flow. Our year-to-date cash from operations was approximately $2.6 billion. This reflects increased earnings, which are somewhat offset by increases in working capital including higher tax payments as a result of tax reform and specifically required payments related to the US toll tax on previously untaxed profits.

In January 2019, we repurchased approximately 1.9 million shares. We anticipate that capital expenditures will be $600 million to $650 million in 2019. And I will provide 2019 guidance. Based on our momentum from 2018 an assessment of the current economic and market conditions, we expect organic sales growth to be in the range of 6.5% to 7.5% for 2019.

This growth will vary by quarter as we typically see stronger quarters in Q3 and Q4 especially given new product ramping and acquisition anniversaries. As you update your quarterly models, please note that Q1, Q2 and Q4 have the same number of selling days while Q3 has one more selling day.

If foreign exchange rates hold near current levels, we anticipate sales will be negatively impacted by approximately 0.5% in 2019 and EPS to be negatively impacted from zero to $0.10 per share for the full year and $0.02 to $0.04 for the first quarter. We also expect continued unfavorable price reductions of 1% to 1.5%, which is fairly consistent with the pricing environment experienced in 2018.

In addition, we expect to continue to deliver on our full year commitment to expand operating margin including the negative impact of our current acquisitions we anticipate expansion of 30 to 50 basis points of operating margin in 2019. We expect that acquisition integration activities will have a bigger negative impact on operating margin during the first half of 2019.

Finally, for 2019 we expect adjusted net earnings per diluted share to be in the range of $8 to $8.20 for the full year including approximately $1.80 to a $1.85 for the first quarter.

And now I will open up the call for Q&A.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Your first call comes from Robbie Marcus with JPMorgan. You may proceed.

Robert Marcus -- JPMorgan -- Analyst

Thanks so much and congrats on a great quarter. So, at the November analysts day, you told us that 2019 was going to look very much like 2018, and you've delivered on that promise with guidance very much in line with 2018. Can you give us, you know, a little bit of puts and takes and what are the key drivers on the top line for next year that we should be aware of by business?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, I think, if you look at it, overall, we do have very similar headwinds, tailwinds. We have some important product cycles that we're going into and you know Endoscopy is gearing up to launch their next generation camera, the 1688, which will happen by the end of the first quarter.

So, that will be significant for them, we finished the year on orthopedics with a very healthy order book across our capital businesses including MAKO, so with 54 robots in the quarter and a healthy order book, we expect another strong year for MAKO and we're seeing an acceleration in our hips, given the launch of our 3D printed cup that has been really well received.

And so that will be a driver, we've launched several new trauma products including a new intramedullary nailing system that was launched late in the fourth quarter and that helped drive the acceleration sequentially in trauma and will be a factor as we look to this year. And then if you look across the board into the MedSurg businesses, there's a lot of momentum across the board neurovascular has multiple product launches.

We're still seeing strong momentum with Atlas. They're also gearing up for the launch of their aspiration system and related accessories. Their medical has new product launches happening with Physio-Control, a new AED that's available OUS and is launching in the US as well as continued acceleration in Sage as we move past some of the regulatory challenges we had and then instrument is really benefiting from really expanded product portfolio on the heels of several acquisitions.

And then obviously, we're also looking for continued acceleration in spine to get to the pro forma spine revenue growth of 5% for 2019. So, there's no one single thing, we really are a number of singles and doubles, the totality of which is really allowing for the strong top line and what we believe will again be at the high end of MedTech.

Robert Marcus -- JPMorgan -- Analyst

All right. Great. And then Glenn, a financial question for you. I know you don't guide by the different line items on the P&L, but with a couple of deals that are getting integrated, and it looks like a gross margin that came in a little bit below the street in the fourth quarter. Can you give us some high level thoughts of how we should be thinking about the P&L and as we think about operating margin expansion, what's the underlying versus the M&A impact for next year? Thanks.

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah. So, while we don't specifically guide on gross margin, but I would tell you to keep in mind that gross margins really impacted by many factors. The largest of these really being mix price and just productivity and efficiency. If we think about sort of the programs we have in place to improve gross margin as well as operating expenses I've sort of break them into two categories. Gross margin is really impacted by our product lifecycle management programs and our plant network programs, those really provide a longer sort of period before the benefits really kick-in.

If you think about operating expenses savings will be driven by improved sales leverage plus programs that we have around indirect spend and shared services. And most of these and we've started to see some savings. So, on the negative side though, M&A will continue to impact our op margin negatively especially in the near-term, as we see sort of the impacts from operating expenses on acquisitions, as we seek to really ramp sales on those acquisitions.

So, I would say, in summary in the near-term, we probably see more opportunities out of operating expenses near-term, but over the longer term we'll drive better savings at the gross margin line.

Operator

Your next call comes from the line of Bob Hopkins with Bank of America. You may proceed.

Robert Hopkins -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, and good afternoon. Kevin, if OK, I wanted to start with just a little bit of an overview. I mean obviously was an exceptional performance in the quarter and for the year. The company is obviously executing very well. Really seeing strength across businesses and geographies. I guess my question is this all sort of Stryker execution and product flow or do you also think that the markets that you're participating in are having some showing some good momentum. Maybe talk a little bit about like the health of capital markets, health of growth markets, because it seems pretty obvious you're executing well. I'm curious how much of this is also just healthy markets as well?

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, thanks, Bob. As you've seen over the past six years, we've consistently outperformed the market somewhere between 200, 250 basis points and that's been an every year thing. This year we exited the year feeling very, very bullish about doing the same again next year. The markets in MedTech have moved up a little bit over each of the last few years. So, I would say, the market outlook is healthy. Our order book is a good sign of that, in fact, that our capital order book is very good.

Look at something like beds and stretchers with double-digit growth and we're really without any significant new products and a couple of minor products, but nothing major. That's really our great execution and I would say fairly healthy markets. What's really different about 2018 is the performance that we had outside the United States which you saw we actually grew faster organically than we did inside the US and we had very good US performance. So this has been a multi-year effort to really improve our globalization Europe as you know has been a star for us the last few years. But in addition to that we really stepped it up in Japan and emerging markets pretty much across the board at terrific performance. So, I'm really excited about the ability to sustain this performance outside the US which then complements what we already know is a very, very strong offense inside the US.

Robert Hopkins -- Bank of America Merrill Lynch -- Analyst

And then one specific question on knees since obviously that's been such a nice visible growth driver for the company, I mean, the MAKO numbers are super impressive this quarter in terms of procedures and systems sold, and you grew I think your knee franchise just in the high sixes in 2018, when you kind of look at the momentum of the new business in terms of MAKO in terms of cementless. Is there enough momentum in the business that you can continue to outpace the market in knees to the degree that you've been doing in 2018, as you look to 2019 ?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, Bob that's fully our expectation. We've got as we mentioned the strong order book, the mounting clinical data all the data points that we look to whether it's utilization rates or growth in surgeons trained are all really positive. So, we fully expect to continue to take meaningful market share. It's going to bounce around quarter-to-quarter and because the recon market bounces around. We were up against really tough comps in the US this year, and still we have to wait for a better report, but I think we grew by 100 basis points ahead of the market, so that's absolutely the expectation for this year.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Bob, I'd just add that we expect that MAKO will continue to grow and we're still in the early stages not even two years since our full launch. And we also expect cementless to continue to grow, to exit the year over 30% is something that we feel very good about. And frankly when a competitive surgeon switches they're changing their implant, they're learning MAKO, a lot of times they'll initially switch with cemented knees, and once they gain confidence and comfort with MAKO, they will then move to cementless. So, cementless still has significant runway and surgeons are really, really pleased with the results they're seeing with their patients, and that's what's causing the extra uptick. So , we believe 2019 will be another year of strong above market performance in knees.

Operator

Your next call comes from the line of David Lewis with Morgan Stanley. You may proceed.

David Lewis -- Morgan Stanley -- Analyst

Great . The question for growth for Kevin and maybe I have a quick follow up. So, Kevin, as you sort of mentioned you're obviously finishing the year with the strongest momentum, I think, I've seen in several years and the strongest guide and intend obviously. So, if you think about how the business is performed in '18 relative to '19 do you expect the same general relative performance across those business segments from a growth perspective at '19 versus '18 or are there significant segments you think will change from a relative perspective?

Kevin A. Lobo -- Chairman and Chief Executive Officer

Thanks, David. I would tell you that we've got strong momentum across our businesses. I would expect similar performances out of orthopedics. Similar performances out of medical, endoscopy should move up a little bit given the 60-day launch. But then you've got some really tough comps in some of the Neurotechnology businesses, which I still think will grow very robustly, but perhaps moderate just ahead. But overall there's strength everywhere, really the one business that hasn't been performing as well for us in the past has been spine. Now with the K2M acquisition, I think, that story changes dramatically starting in 2020, in 2019 we don't, we won't report K2M within our organic sales, but what we will provide each quarter our pro forma results, so you can see what the combined business is doing. We expect mid single-digit performance in on a pro forma basis and then obviously in 2020 that will then roll into organic. So we're really excited with the speed of that integration and being able to post these numbers with the spine business that's been essentially flat for the past five years is pretty remarkable.

David Lewis -- Morgan Stanley -- Analyst

Okay. Kevin, thank you. I just have two quick follow-ups, one for you, and you already talked and touched on a little bit the neurotech business was probably the only business trauma recovered. So neurotech was the only business in the fourth quarter that looked like it decelerated. That was surprising just in light of the product cadence, the momentum there, maybe you can talk through that and then for Glen to the extent that MedSurg outperforms in 2019 any concerns that mix driven pressure would sort of take you out of that 30 to 50 bps range or you feel very confident in that 30 to 50 bps of margin? Thanks so much.

Kevin A. Lobo -- Chairman and Chief Executive Officer

So, on the neurotechnology businesses, I'm very bullish on the prospects in 2019, as Katherine mentioned neurovascular is launching a number of exciting new products. We have the neuro power drills, the CMF business they're all very healthy businesses. You have Entellus now that's reported as part of the neurotechnology business that's doing very well and it's an integration, picked commerce from quarter to quarter you'll see a little bit of movement, but I would expect a continued robust performance there.

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah, and then David on your question on MedSurg we've been balancing that story probably for the last two years, as we've pushed forward with a lot of these CTG initiatives. So I do expect robust growth out of MedSurg, but the minus there is lower gross margins, but frankly in the operating expense side of MedSurg, they perform on a lower level of burden than the orthopedic businesses. So, overall I think based on what we're forecasting I think we've balanced, so that we can deliver to the 30, 50 basis points that we're promising.

Operator

Your next call comes from the line of Raj Denhoy with Jefferies. You may proceed.

Rajbir Denhoy -- Jefferies -- Analyst

Hi , good afternoon. Maybe start a little bit with the emerging markets performance in the quarter double -digits, it's been strong now I think for a couple of quarters. So, is there anything in particular you can point to in terms of those markets and the sustainability of growth in emerging markets for you?

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah, so we've been working on this as you know for a number of years and all four quarters were double-digit growth this year for Stryker, which really is encouraging as I think about the future. We made a lot of leadership changes in Latin America. Latin America had a terrific year in 2018 same thing with the EMEA markets. Turkey, we bought a distributor, and they had a very strong performance. Russia is performing well. China, of course, is the most important of the emerging markets, and I would say we had very strong performance in China. A lot of new leadership put in place and even our (inaudible) business had a nice bounce back here within China. India, we had a tough sort of beginning part of the year, the first couple of quarters. Again, we've made some leadership changes with the new managing director, and they had a very strong fourth quarter and the outlook is pretty bright.

So, for us it's been a story about really getting the talent offense focused and firing and that's been an effort that's taken us a couple of years. I'm very optimistic that we'll be able to continue this trend in the emerging markets and as you know it represents a very small percentage of Stryker's overall sales at around 6% and for us that's a huge opportunity for the future and we're better positioned in emerging markets than we have been since I've been at Stryker.

Rajbir Denhoy -- Jefferies -- Analyst

No, it's helpful. Maybe just like a follow-up with one product area. So, medical, it's not your biggest segment or has been your biggest segment for a while now, but it was also when your fastest growing, if not the fastest growing, and you mentioned beds and stretchers. But are there other areas within that category in particular that you're seeing really strong performance in whether Sage or other areas?

Kevin A. Lobo -- Chairman and Chief Executive Officer

Well, I mentioned, in my opening remarks that physio-control had double digit growth which to me was really exciting. We have a new AED outside of the US, but it only got approval in the US at the end of the year. So, we haven't been seeing any of that benefit. So, this is really a terrific sales and marketing execution, and we've put in some Stryker leaders there a couple of years ago, and they really are driving more of our Stryker sales culture in a business that already had terrific products, and so that's one highlight.

Sage recovered somewhat, but frankly I think we'll have a better year in '19 than it did in '18 had a strong fourth quarter, but really had to make up for the losses of the regulatory actions or remediation. And so they had mid single digit growth. It was really the other parts that our core medical business and physio that had very, very strong performances.

Operator

Your next call comes from the line of Matt Miksic with Credit Suisse. You may proceed.

Matthew Miksic -- Credit Suisse -- Analyst

Hi. Thanks for taking the question. A couple of quick follow-ups on MAKO and the strong trends there? Just one curious to see what the dynamics have been like in the marketplace, as surgeons have learned a little bit more, hospitals learned a little bit more about this competitive system that has been kind of on track to come to the market.

So, that was unveiled sort of in the back half of the year. Curious how that has impacted the US and then OUS, I just thought it was worth noting and maybe talking about what has been this driver of really a pretty significant step up and system placements overseas and what's triggering that and what we should do to about modeling that and then I have one follow-up for spine, if I could.

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, thanks, Matt. I think what we've seen is continued execution and really building on the momentum given the years that we've been at robotics, building on the clinical data with the only robot out there with haptics with the ability to balance the name. We're seeing the benefit of that in the clinical data some of which we talked about on the last call and we'll continue to see come out throughout this year particularly as we approach August.

And we had a record number of robots in the quarter and we've got a healthy order book. So, it isn't any one single factor, it is building on the momentum and the clear benefit that surgeons are seeing, we're continuing to see hospitals purchase second and third robots which really speaks to the mounting benefits that the entire surgeon group sees, and that's the same thing driving it outside the US different geographies we see different uptake given the different healthcare systems.

But clearly we're seeing very healthy growth outside the US. I think the US will continue to be the big driver, we have a lot of runway, I think, it's helpful given all the data points we give you around system sales, pricing, utilization rates, surgeons trained, data as you look at competitive offerings will make it really easy to do a comparison.

Matthew Miksic -- Credit Suisse -- Analyst

That's Great. And then on the -- go ahead, sorry, go ahead, Kevin.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, just before you move to spine on that, I would just add that we only have a small number of placements in China and Japan. I think they are going to be very big markets in the future, but given the regulatory timeline we still don't have approval for the knees, we have approval for hips which of course are big markets, and we've just started to sell there. We also built a training center in Hong Kong that will be used to train surgeons in the Asia-Pacific region on MAKO, so we're very bullish about the continued growth.

I think '19 may not be a great year in those two markets, certainly the rest of the world Latin America and Europe will continue to be good, but I think starting in '20 you could expect to see a pretty significant uptake in MAKO in China and Japan.

Matthew Miksic -- Credit Suisse -- Analyst

That's excellent. Thanks. And then on spine, so I guess question I would ask you've got a great asset obviously in our opinion anyway that you're rolling into the Stryker, onto the Stryker, into the (inaudible). You've brought in leadership which is a plus obviously strong and complex and then it's sort of like a 3D printed products and I asked in a variety of other sort of leading edge competitive ends of the market, so great potential setup.

I guess what if anything are you focused on or worried about or in terms of the integration what are you most focused on making sure that you maintain here to sort of maximize the impact and minimize dissynergies.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah. So, the US sales force integration is the most important part of this integration that's taking the bulk of our energy prior to the closure of the deal -- in a clean team environment. We actually looked at all the territories, looked at all the overlap, and I can tell you, I'm wildly impressed with how fast Eric and his leadership team, which is a mixture of Stryker and K2M people.

How fast they've moved on making decisions on the regional managers, on making decisions on the territories, and so once people know who their surgeons are and have access to the full bag of products, the quicker you can do that, the quicker you'll make sure that you can grow the business, and not have dissynergies. As you know that's been the challenge of spine deals in the past.

I would say they're ahead of where I thought they would be at this stage, but that's what we're going to watch most closely is US sales force integration and making sure that we don't lose sales reps or that we don't lose that surgeon relationship. The good news is we didn't have a lot of overlap. That's one of the things we modeled a certain amount of overlap and we went in with a clean team to look at the actual overlap.

It was less than we had modeled. And so I think the risk is lower for us than what you've seen in previous spine deals, but that is the biggest single risk with this integration and each quarter we'll give you an update on how that's going.

Operator

Your next call comes from the line of Pito Chickering with Deutsche Bank. You may proceed.

Pito Chickering -- Deutsche Bank -- Analyst

Good afternoon, guys. Jumping on Raj's question. If we drill down into like the emerging markets what product lines are you guys seeing the most growth in and do you see that product line growth across all of your like emerging markets?

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, it's really well balanced. So, there is not one single product category that stands out. We've always had a pretty strong endoscopy division in the emerging markets and that continues to be the case. But, I would say, picking up our implant business that's an area that we've been particularly soft in the past. We're starting to really pick that up in the emerging markets, but it's really kind of across the board, given our small presence, we have a long way to go to really across our businesses to grow, but it isn't just in one area.

What I'm most excited about is, if we get the implant business really rolling, that provides the stability and the scale to then be able to deal with the capital fluctuations that invariably occur in these markets. In the past we've been a little bit overweight in the capital equipment area, and that's the part that we're really focused on, and I'm feeling very encouraged about our progress.

Pito Chickering -- Deutsche Bank -- Analyst

All right. Fantastic and then a quick bring tax question for you. Like you got tax rate of 16% and 17% versus 16.7 for the full year of 2018. Did you face any impacts in the recently proposed IRS regulation that close the hybrid tax loophole? Is that impact you guys either in 2019 or in 2020?

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah, right now we are not estimating an impact and we really are pretty much sticking with the tax guidance that we developed at the beginning of this year, and we have been monitoring the regs as they've been coming out. So, as you can imagine it's a moving target as they continue to issue more guidance around some of the more complex parts of the new tax laws, but right now we don't see an impact from that.

Operator

Your next call comes from the line of Chris Pasquale with Guggenheim. You may proceed.

Christopher Pasquale -- Guggenheim Securities -- Analyst

Thanks. Katherine, MAKO, obviously had a very strong quarter, but the magnitude of the beat in that other ortho line seemed a bit outside is relative to the step up in robot placements you were up maybe 15, 17 systems from 2Q and 3Q, but revenue for that segment jumped by almost 50 million. Was there something else in there that contribute to that upside?

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, maybe I'll take this one, the real primary impact of that sales line, I mean, obviously relates to the robust installs for MAKO robot, but there were also impacts related to the mix of sales that's in that line. So, we saw a higher percentage of kind of recognizable capital revenue that hit that line and that was combined with positive price, increased maintenance and also sort of less erosion from bone cement. And all that kind of added up to what you're seeing there.

Christopher Pasquale -- Guggenheim Securities -- Analyst

That's helpful. Thanks. And then one detail one for Glenn, can you just go back to your comment about the expected impact of currency on earnings this year zero to $0.10 seems like a pretty wide range. And I would have thought that the bulk of the impact would fall in one queue. So, can you just walk through your thinking there?

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah, you know, it's early in the year and it's obviously something that's very variable depending on our own operations and also what happens to currency. You know, right now, we're seeing probably the greatest impact of that zero to $0.10 forecasted to hit Q1, and then we expect it to be pretty moderate for the rest of the year. And so that's kind of where our guidance is right now, based on what we can see.

Operator

Your next call comes from the line of Larry Biegelsen with Wells Fargo. You may proceed.

Lawrence Biegelsen -- Wells Fargo Securities -- Analyst

Good afternoon. Thanks for taking the question. One on MAKO, one on M&A, Katherine, at the beginning, I think, 2018 you said MAKO units would grow year-over-year after strong 2018 with about 158 robots. Do you still think units can grow, placements can grow year-over-year in 2019? And can you remind us of how common volume based contracts are for you guys versus pure outright sales of the robot and I had one follow-up.

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, so the majority are pure outright sales of the robot, and we absolutely expect to have a double-digit growth in robot installed this year.

Lawrence Biegelsen -- Wells Fargo Securities -- Analyst

Thank you. And then on M&A Kevin or Katherine, you know, I can't remember a year where Stryker didn't do a few acquisitions. Could you just kind of give us a snapshot of how you're thinking about M&A in 2019 and how much flexibility you would have on the 30 to 50 basis points of operating margin improvement in 2019. In other words would you be willing to sacrifice that? Thanks for taking the questions.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Well, as you know the nature of M&A is inherently unpredictable. It is our number one source and planned use of cash. That's not changed. In six years I would expect us to continue to be acquisitive. As it relates to dilution once we see an asset that we think will be really value creating for Stryker. We're going to want to do that deal and then we'll look at the related dilution and figure out whether we can offset it or not.

As you've seen, we are very committed to operating margin expansion. We've been able to offset NOVADAQ and tell us K2M deal after deal that are high growth deals that have dilution we've been able to offset. In a hypothetical sense, if we saw one that was really a fantastic asset, and it caused us to be lower in the range, well, then we would then communicate that.

I wouldn't say, it would be off the table, but that doesn't take away from the efforts we're going to make to continue to drive margin in our core underlying business.

Operator

Your next call comes from the line of Glenn Novarro with RBC Capital Markets. You may proceed.

Glenn Novarro -- RBC Capital Markets -- Analyst

Hi, good afternoon, guys. Kevin a question on trauma and extremities. Results were better fourth quarter than we saw in third quarter. So on trauma in the US, you had supply issues in the third quarter. Have those been resolved and what was the performance of US trauma in the fourth quarter? And then my follow up, my second question is on extremities. Looks like that did not post in the US double-digits. On past calls, you've talked about just the law of big numbers. So, if you can provide a little bit more color on US extremities growth? Thanks.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah. So, our US trauma and extremities grew 7% and keep in mind that we had a double digit growth comparable in the prior year. So I would tell you that the supply problems are largely behind us and the issues that occurred in the third quarter are not completely resolved, but largely behind us. And that really helped us be able to get back to the kind of growth we were more accustomed to in trauma and extremities.

Our shoulder business really picked up quite nicely. It's the foot and ankle area that had been growing in the 30 kind of percent range for the first few years when we really built out that business. That's starting to come down to earth a little bit more in line with the market. But I would tell you that extremities still continues to be one of the most attractive areas within orthopedics and we plan to launch a short stem shoulder in 2019 that will continue to drive momentum in an already good-performing shoulder business.

Keeping in mind that we still have relatively low market share in shoulder, but very pleased with the performance overall with trauma and extremities and expect another strong year in 2019.

Operator

Your next call comes from the line of Larry Keusch with Raymond James. You may proceed.

Lawrence Keusch -- Raymond James -- Analyst

Oh, thanks. Good afternoon, everyone. Just want to circle back on emerging markets. Kevin, you said 6% of sales. Given the investment that you guys have been making over the last several years. Where do you think is a reasonable place for you to take that business as a percent of your revenue. So, said another way, what sort of gets you happy when you believe you've got enough scale there?

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, so I mean the average in MedTech is roughly 12%. And you have some companies like Abbott, Becton Dickinson that's higher than 12 given them the product portfolio they have in companies like us that are sort of below that average, the challenge that we have is we continue to acquire companies that are largely US based whether it's a K2M, whether it's Invuity, whether it's Entellus a lot of the great new technology companies, NOVADAQ, they tend to be in the United States.

And so they're not overweight our US business, I would expect the emerging markets to continue to be let's call it strong double digit growers every single year. And so as long as it does that over time it will take on a higher percentage of our business as long as those acquisitions also start to grow in the emerging markets. So, getting to double digits would be great, but the reality is as long as we're growing in strong double digits and those businesses are gaining scale and size that's really more important to me than a magical number that we get to by having the US lower its growth.

And we're growing close to 8% in the US, I don't want that to slow down. That's one way the emerging markets percentage can rise if we slow down in the US and that's obviously not in our plans, but if we continue to have robust double digit growth in emerging markets over time that 6% will move up and it should be for a company like ours more like in the 10% plus range over time.

Lawrence Keusch -- Raymond James -- Analyst

Okay, perfect. That's clear. And then just as a follow up you obviously mentioned in your bed and stretcher business nice performance in the quarter and you made the comment that was really without any new product introductions. So, I guess, the question is what do you have coming there in 2019. and do you think that we might be at the beginning point of a replacement cycle as I understand, I think, the last replacement cycle certainly in MedSurge was in the 2004, 2005 timeframe.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Look, the replacement cycle is continuous. So, there isn't sort of one massive replacement cycle. You have hospitals buying other hospitals and wanting to standardize on their equipment. We bring a lot of technology so when we say no new meaningful new products we meet an entire new frame and with all the features we're constantly updating software we have new surfaces that we launch.

So, there is always some form of innovation. There wasn't any major platform launch. We're not going to really get into the timing of those launches. Those are the things we prefer to wait until those products are actually launched, but suffice to say that we have a really good pipeline within our medical business both for the beds the stretchers as well as the emergency cost.

Operator

Your next call comes from the line of Isaac Ro with Goldman Sachs.You may proceed.

Isaac Ro -- Goldman Sachs -- Analyst

Good afternoon. Thanks for taking the question. So, I just wanted to ask another one on MAKO, just putting together some of the commentary here on the call you referenced that still over 40% of placements are coming from competitive accounts, and that if I look at the numbers that mix is done a little bit sequentially, but obviously still pretty strong and at the same time you're talking about opportunities to place additional instruments in existing accounts that have MAKO already. So, if I put all that together, I'm curious -- how you think the mix of competitive placements will play out over the next 12, 24 months given the competition there probably gets a little bit thicker?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, I think, we're going to have to wait and see. We've been running pretty consistently north of 40% in competitive accounts and it did jumped over 50 last quarter. But if you look back as we've reported that number each quarter it's typically hovered between 40% and 50%, and I think we're just going to have to wait and see how it plays out with competitive launches.

And we haven't been through this before we feel really comfortable that given the number of hospitals available to us, the clinical data we have, the unique features of our robot and that we're going to have the ability to continue to install new robots. What the mix ends up looking like we'll probably move around, but clearly competitive accounts are going to be part of it.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, I think, the addition of competition to the market is not necessarily a bad thing. If you believe you have a proven system that really delivers terrific value. We would welcome sort of a head to head comparison in some accounts that maybe haven't been opened to having that discussion. So I think that the entry of other products in the market actually will grow robotics and robotics as you saw and if you've been went to AAOS, the last few years, it's dramatically changed the whole dialogue about robotics is everywhere, they're here to stay. And I think more interest in robotics will frankly provide a tailwind in the market and a tailwind for our MAKO business.

Isaac Ro -- Goldman Sachs -- Analyst

Great. And Kevin just maybe a follow up on the earlier comment you made about the source of the upside in the other component of orthopedics. Can you just maybe break down again a little more clearly. The biggest reason why that looks a little stronger, if I read you right, the biggest piece was the capital equipment kind of revenue piece was stronger and the reason I ask is, I'm curious if that's a trend that you expect to continue this year that basically the mix of revenue you're getting in that business on a trajectory that looks sustainable? Thank you.

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah. Hi, Issac. This is Glenn. If you look at Q4 first of all that is seasonally by far and away the most robust sort of capital cycle selling that we see. And so what we really saw MAKO in that line item which is primarily made up of MAKO and bone cement. With a couple of things obviously really robust installs 54 in the quarter which was significantly higher than prior year quarter and then also just in terms of the nature of whether or not they were rentals whether or not they were lease sales through we just saw a higher rate of sort of the recognizable capital revenue sales than we've seen in prior quarter. And then that really combined with just positive price. We're also starting to see revenue come off of maintenance contracts as we get hit sort of a critical mass it's out in the field. And then lastly just less erosion from bone cement which really combined to sort of produce the robust number that you're seeing there.

Operator

Your next call comes from the line of Joanne Wuensch with BMO Capital Markets. You may proceed.

Joanne Wuensch -- BMO Capital Markets -- Analyst

Very nice quarter and thank you for taking the question. Two questions really, what happens when you get into these competitive accounts with MAKO. How sticky once you are there becomes utilization of all the other products that Stryker has?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

It's pretty sticky, Joanne, we grow by multiple factors faster in the accounts that have a MAKO system because well first of all the system is closed, but then the sales force has the opportunity to go in and sell the entire portfolio and benefiting from a new hip cup that they can go in and sell, plus our various 3D printed products around the knee system, so it absolutely has that halo effect, once we get the robot in there, so it's not just selling triathlons, we see significantly faster growth across our portfolio of recon products in those MAKO accounts.

Joanne Wuensch -- BMO Capital Markets -- Analyst

And with AAOS coming up can you give us a highlight of what we should be expecting there? Thank you.

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, we'll have the opportunity to meet with the senior management team as we customarily do also do a boost to booth tour. We're still finalizing, but we anticipate having clearly MAKO to Robert Cohen will be there to answer questions on the robot. Eric as I mentioned will be there to talk about the K2M integration and some of the product portfolio. We will also have our new 1688 camera at the booth , and so that will be part of the tour as well as some trauma products. And I believe that info was out on the website for folks who want to sign up for the booth tour or attend any of the investor meetings with the senior management team.

Operator

Your next call comes from the line of Craig Bijou with Cantor Fitzgerald. You may proceed.

Craig Bijou -- Cantor Fitzgerald -- Analyst

Hi, guys. Thanks for taking the questions. Just to follow up on guidance, it's a little wider than 2018 for both organic growth and EPS, obviously FX the uncertainty around FX impacts the EPS range. But just wanted to see if there's any reason for the wider guidance perhaps macro concerns and then maybe just a bigger picture. What are your thoughts on how the macro environment can impact you guys in '19?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, we feel really good about the overall macro environment as it currently stands as Kevin referenced in his comments, and we also feel good about the momentum we have exiting 2018 across the businesses. Just keep in mind we're a much bigger company and so there's a larger revenue base we're in more markets, we've done acquisitions so there's just more variables overall, typically we've had a basis point range similar to this year.

So overall, I think, with the highest guide in the decade recognizing that things change, and we're a big diverse business I think it's a appropriate range to start the year at.

Craig Bijou -- Cantor Fitzgerald -- Analyst

Great that's helpful, and just one follow up on pricing. Glenn, I appreciate your comments and the expectation for '19, it is a little bit lower if you look at the midpoint compared to what you guys had in -- for the full year 2018 and then even if you look at orthopedics sequentially pricing decreased significantly in Q4 from Q3. So just thoughts there I mean is the environment getting better from a pricing perspective?

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah, I think -- if we think about price, both the performance this year and what we're guiding to next year I mean a couple of things. I think it's less bad than it used to be a year ago, but I also think that if you just sort of look at the mix of where we expect growth to come from obviously MedSurge will be a big grower next year for us and they are less susceptible to price and the same holds true for some of our international sales. So I think given that mix we probably will see sort of a similar pricing environment maybe even a little better into 2019.

Operator

Your next call comes from the line of Josh Jennings with Cowen. You may proceed.

Joshua Jennings -- Cowen & Co. -- Analyst

Hi. Good evening, thanks. I was hoping to start off going back to the operating margin performance in 2018, it sounds like you're able to absorb 50 basis points of acquisition headwinds and with the 40 basis point performance, you really out achieved the core business -- out achieved or outperformed the top end of the range and maybe just help us understand what's going better and you laid out the CTG program, I think, in November 2017 and you're having a stronger than expected expansion in the core business.

And how much of that outperformance is volume driven just tagged onto the -- to the stronger revenue growth that you experienced and you've generated.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah I think as you think about that performance and certainly covering the impact of acquisitions there's a lot of puts and takes that flow through margin you know a couple of things I will say is there is -- first of all there's a really disciplined leverage approach that's done by all of our businesses as they think about over performing their targets and how much they need to drop through, so much so that it's a part of everyone's incentive plan here at Stryker.

The second thing I would point to is that you know these near-term CTG programs like indirect spend and share services, we're really starting to see some of the benefits come through from those programs and those benefits are obviously reflecting in the amount of drop through that we can have. On the flip side of that. Given the amount of acquisitions that we had during the year those were very dilutive to the op margin and you know we push the integration efforts of those as quick as we can especially sort of on the G&A side of things so that we can sort of squeeze better op margin performance even out of acquisitions.

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah, I would tell you that there's been a noticeable change in the speed of our integrations versus even three or four years ago. And obviously that you know the dilution because these are publicly traded companies you can see how negative they are, speed of getting those synergies has increased dramatically. And K2M is a good example where obviously it will be pretty heavily dilutive in the first half of the year and that dilution will start to abate as we drive out those synergies. But speed of integration is a new mantra that Stryker and that's really taking hold of the last few years.

Joshua Jennings -- Cowen & Co. -- Analyst

Great thanks. And maybe just in front of AAOS when I think some of the debate is going to be new competitive robot for the total knee application coming to market and maybe launched at AAOS versus MAKO and maybe some of the different features competitive features that you're going need to defend, I guess, some of the things we understand is the lack of a need for a CT scan maybe some faster registration and allowing the surgeon to actually do the cutting with their own saw versus robot making the cuts.

Any initial points from a competitive defensive standpoint from MAKO versus the ROSA robot. Thanks for taking the questions.

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, we're going to continue to stay focused on the strategy around our robot and executing on the features and benefits that we've talked about the haptics, the ability to balance the knee and the clinical data that's continuing to support the outcomes. I think it's valuable that you've got a number of data points that we routinely report on the quarter whether it's placements, utilization rate, surgeons trained, clinical data that should make it easier to compare those same data points with competitive offering. So, I think, it validates that robotics is absolutely here to stay in orthopedics, and it's impacting the market. So, we're not surprised we're seeing competitive responses, but we're also in no way changing our strategy because it's clearly been successful and we think it's the one to stick with as we think about this year and beyond.

Operator

Your next call comes from the line of Kristen Stewart with Barclays. You may proceed.

Kristen Stewart -- Barclays -- Analyst

Hey, guys, thanks for taking my call. Good to see that the floor is still fully intact from an earnings perspective. I wanted to just clarify just on the Sage commentary you had said, I think, you had said mid single digit growth was up for the fourth quarter. I assume that's not for the full year?

Kevin A. Lobo -- Chairman and Chief Executive Officer

No, that was for the full year. Kristen, it picked up in the fourth quarter. Yeah, so fourth quarter was double-digit, full year was mid single-digit.

Kristen Stewart -- Barclays -- Analyst

Okay, perfect. And then how should we just think about that business going forward? Obviously expect for it to continue to get better from what I'm understanding. So will that kind of evolve back into, I think, it was kind of high-single or double-digit growth profile that you had expected at the time of the acquisition.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, it's great business. The pipeline continues to be really solid. I would expect '19 to be a better year than '18. We exited fourth quarter with a ton of momentum. We have a couple of really interesting new products that they'll be launching in 2019. So, that business should continue to be sort of high-single-digit, low-double-digit growth for the foreseeable future. Obviously, the remediation efforts were very severe, very significant and a couple of the product categories. It took us a little longer to get back that business that we had lost during that interruption, but they're now starting to hit their stride and I would expect that to be a reliable and solid contributor to our growth.

Operator

Your next call comes from the line of Matthew O'Brien with Piper Jaffray. You may proceed.

William Inglis -- Piper Jaffray -- Analyst

Hi, thanks for taking the questions. This is Will on for Matt. I guess my first question would be, if you drill into this ischemic stroke bucket of neurovascular, wondering what you've seen in terms of that aspiration system in terms of utilization as a stand-alone or if it's being used in combination with retrievers and when that's in full launch sometime, correct me, if I'm wrong, but sometime in the next couple of months wondering what impact that will have for the broader ischemic portfolio with regards to pull through and broader hospital contracting?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yes, we're in the very early stages of the launch, but it is absolutely one of the factors that we think is going to contribute to strong neurovascular growth this year. Most of the time it's used in conjunction with the stentriever, because that's really what the clinical data has demonstrated in terms of having the most impact. But you do have those surgeons who prefer to go with an aspiration only as a first path. Typically 40% to 60% of the time you have to go back in with the triever, but we wanted to be able to have an offering for those surgeons who are not currently using a stentriever first. And so it will be a mix of the two, but it's too early to tell you with any specificity how much or what the weighting is between the two.

William Inglis -- Piper Jaffray -- Analyst

Okay, great. Thank you. And then with your combined spine portfolio now placing you kind of in the top three, four, five providers. Wondering if you could give us any updates with regards to your enabling technology strategy in the near-term?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

It's still very early. I think the key here right now is with K2M when we get an immediate product refresh. We get a strong foothold in the deformity market that has a big impact with the thought leaders in this market. We have a much more expanded offering across the board and a larger sales force and we also have an expanded 3D printed offering. And then longer term as we've talked about previously, I think, this position is well in the out years when we bring the spine robot to market but that's still years off.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah , I would tell, you that Eric and the leadership team are evaluating our pre-planning and our navigation. They had their own preplanning system as well as looking at robotics. And given that the focus in the short term has been getting the organization sorted getting the early synergies having the salesforce really mapped that has been job one, I would tell you in the future quarters we'll have a better idea on the enabling technologies. But right now the main focus has been getting the salesforce really organized for success.

Operator

Your next call comes from the line of Vijay Kumar with Evercore ISI. You may proceed.

Vijay Kumar -- Evercore ISI -- Analyst

Hey, guys. Thanks for taking my question. Congrats on a nice quarter here. Just back on the ortho outperformance here in the queue. Did you guys see anything from a competitive perspective, was there any disruption, I think, you mentioned bone cement is being in that other bucket as a driver, there was some disruption on the competitive front and any comments on what drove that outperformance not just in the other bucket, but even in the knees and hips.

And when you think about the new products like 3D printed cups coming in for next year sort of can you put that off roll that all in on what it means for '19?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

So, it's one of the factors behind the revenue guide of 6.5 to 7.5 clearly that we're starting to see the impact of our new 3D printed hip cup. We've had hundreds of surgeons now exposed to it including competitive surgeons. I think that's a really strong offering me that's clearly the MAKO effect overall and bone cement. Glenn's comments were more about the fact that the decline was less significant although we're still seeing some pressure in our bone cement as we continue to ramp up we're now well over 30% of our knees are cementless.

And I think overall that the bulk of the market feels relatively similar from a competitive standpoint as it did in the third quarter. I think most of what we're seeing is share gain related.

Vijay Kumar -- Evercore ISI -- Analyst

That's very helpful and then maybe just one on the margins here. You know a lot of concerns on margins and this guide is really strong. I'm just curious on M&A dilution. Can you give us a sense on how much of a headwind is it to margins that you guys are eating. I mean it looks like the underlying is coming in really strong.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, it's when you look at sort of M&A across the board and you really need to focus on some of the bigger ones especially like K2 you know at the gross margin line it's actually sort of a favorable impact that we'll see. But then when you move on down the selling and the acceleration that we're doing relative to ramping sales almost all of them become dilutive in SG&A and so that's -- this year for the year in the quarter we saw 50 basis points of headwind. I'm expecting that headwind will continue at least through the first couple quarters of 2019.

Operator

Your next call comes from the line of Matt Taylor with UBS. You may proceed.

Matthew Taylor -- UBS -- Analyst

Hi, thanks for taking the question. I did want to ask you about your order book. You talked more about it this quarter than I think I've ever heard you talk about it in the past and I was wondering if you could quantify or give us some more color on how that's improved sequentially or over time and what are the main areas of strengths outside of MAKO?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Yeah, it's really across the board with our capital facing businesses. We're obviously gearing up for the launch at the end of the first quarter of the 1688 camera. We're excited about that, MAKO candidly we had a really strong quarter, but we also didn't want to convey to people that somehow it's a pull through of orders that we had anticipated in the first quarter. It was not and so it's just across the board, medical is having really strong growth and we usually have a pretty good visibility into their order book going out a few quarters, so there's no one thing we would highlight, it just across the board feels pretty healthy going into the year.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Yeah, even instruments has a very strong order book and instruments if you notice double digit growth on top of a comparative Europe double digit growth and a strong order book. And part of the reason we're sharing a little bit more on the order book is we're starting off with a very significant guide a really strong organic growth guide and let you know that we have the confidence behind that guide is a strong order book really across the board, so entering the year with very good momentum.

Matthew Taylor -- UBS -- Analyst

Right, that makes sense and I just wanted to put you slightly on the spine of it, but I'm curious as you develop your expertise in your clinical data around MAKO. You're gathering a lot of robotics kind of nuggets here as we go along. Do you think that there are other areas that you can bring that expertise to even outside of hard tissue or can you talk about the relative importance of using robotics in a knee procedure versus spine versus extremities?

Glenn Boehnlein -- Vice President, Chief Financial Officer

Yeah, so for right now we've been very clear that our focus is hard tissue robotics starting with obviously hips and knees. We certainly have the opportunity with shoulder and spine and we have teams that are working on that it's early stages and certainly too premature for us to talk about potential launch dates and what that's going to look like but that's our focus. We're not really looking at that soft tissue robotics right now it's really a hard tissue robotic focus.

Operator

Your next call comes from the line of Kyle Rose with Canaccord Genuity. You may proceed.

Kyle Rose -- Canaccord Genuity -- Analyst

Great. Thank you very much for taking the questions, and I reiterate that the sentiment on a strong Q4. Kevin, I just wanted to talk quickly from a high level on the portfolio. If I think about some of the recent acquisitions was NOVADAQ in 2017 and Invuity in 2018, both obviously bring differentiated technologies to leverage across the core business. But they both overlap in an area where the Stryker's historically not competed. And that being women's health and breast recons, so just

maybe in a larger sense, I mean, how do you view the portfolio strategy and the vision here as far as you know the direction that these assets position for the portfolio?

Kevin A. Lobo -- Chairman and Chief Executive Officer

So I'll start with Invuity. And so within instruments it's a pretty broad portfolio of products and what Invuity did was helped us to catalyze a split of that sales force. So, the surgical unit within instruments has the power tools, it has the gowns that cover the surgeon. It also has Neptune waste management, surge account and frankly hard to focus on all of those different call points.

And so Invuity, it's beautifully with neptune waste management as well as the surg account procedures on in that call points where we created a new specialized sales force called surgical technologies and then orthopedic instruments that includes all the power tools as well as the sterile shield products and that are really sold in the ortho area.

So if anything it helped us drive extra focus and enabled us to specialize our sales force and that's going to be a catalyst for instruments to continue what you've seen as a kind of amazing performance over the last decade of very, very high single or low double digit growth year after year after year. So, it's really not something that's a new call point.

It actually strengthens a basket of products that we've either invented or acquired in recent history. As to whether we'll get into other areas. That's just something Stryker continually looks at. And if we believe that our sales force can bring new technologies to call points we'll do that. But our biggest asset of Stryker is our sales forces, we know how to run a great offense, and if can bring them new technologies and continue to specialize the sales force is we're going to continue to drive high growth.

Kyle Rose -- Canaccord Genuity -- Analyst

Great. And then just a follow up on the hip side. I mean I know you talked about the new 3D printed cup, but when we talked about MAKO you talked about 50% of the US procedures still being TKA, I guess, I'm just right to understand how much of an opportunity is there to really see a MAKO effect on the hip side. And then when you're seeing competitive accounts that you're bringing over with MAKO, are you seeing them trialing the 3D in the hip portfolio or are they really staying more centralized to the knee side?

Katherine A. Owen -- Vice President, Strategy and Investor Relations

No, we absolutely see them trialing it, especially it's a great opportunity given the launch of the new trident to come out there, so we always knew or believed that the biggest driver of the MAKO adoption was going to be around the total knee given the unmet need and patient dissatisfaction rates. But we continue to see increases on the hip side as well and that's part of the benefit of once you get into account and you can sell the totality of the offering and the surgeons start to see some of the benefit. So I think knees given their 60% of the procedures will still dominate, but absolutely we see an impact from hip.

Operator

Your next call comes from the line of Ryan Zimmerman with BTIG. You may proceed.

Ryan Zimmerman -- BTIG -- Analyst

Thanks for squeezing in and congrats on the quarter as well. So just one question for me, you know, the European MDR regulation kicks in 2020 making '19 more of a transition year. On the surface it appears quite onerous, I'm just wondering, if we should be thinking about any incremental costs potentially from the -- this regulation that's coming in place in Europe and or do you intend to remove any skews out of the European markets that maybe don't make sense? Thank you.

Glenn Boehnlein -- Vice President, Chief Financial Officer

Ryan, we've actually been working on the registration process related to the new regulations over the course of the past year and early on -- in the year according with our -- in accordance with our sort of our non-GAAP policy, we received approval to remove those costs from our -- from our regular earnings and move them to non-GAAP. So in terms of the guidance you're getting and the numbers you are seeing, you're really seeing the excess cost the extra costs removed. Now you're correct any going forward kind of burden that we might have related to the regulations would flow through our regular R&D line item as we -- as we up our sort of our standards relative to that regulation.

Ryan Zimmerman -- BTIG -- Analyst

Got it. Thanks for the info Glenn.

Glenn Boehnlein -- Vice President, Chief Financial Officer

Okay.

Operator

There are no further questions at this time. I will now turn the conference over to Mr. Kevin Lobo for any closing remarks.

Kevin A. Lobo -- Chairman and Chief Executive Officer

Well, thank you all for joining our call. Our conference call for the first quarter 2019 results will be held on April 23rd. Thank you.

Operator

Thank you. Ladies and gentlemen this concludes today's conference, and thank you for participating. You may now disconnect.

Duration: 76 minutes

Call participants:

Kevin A. Lobo -- Chairman and Chief Executive Officer

Katherine A. Owen -- Vice President, Strategy and Investor Relations

Glenn Boehnlein -- Vice President, Chief Financial Officer

Robert Marcus -- JPMorgan -- Analyst

Robert Hopkins -- Bank of America Merrill Lynch -- Analyst

David Lewis -- Morgan Stanley -- Analyst

Rajbir Denhoy -- Jefferies -- Analyst

Matthew Miksic -- Credit Suisse -- Analyst

Pito Chickering -- Deutsche Bank -- Analyst

Christopher Pasquale -- Guggenheim Securities -- Analyst

Lawrence Biegelsen -- Wells Fargo Securities -- Analyst

Glenn Novarro -- RBC Capital Markets -- Analyst

Lawrence Keusch -- Raymond James -- Analyst

Isaac Ro -- Goldman Sachs -- Analyst

Joanne Wuensch -- BMO Capital Markets -- Analyst

Craig Bijou -- Cantor Fitzgerald -- Analyst

Joshua Jennings -- Cowen & Co. -- Analyst

Kristen Stewart -- Barclays -- Analyst

William Inglis -- Piper Jaffray -- Analyst

Vijay Kumar -- Evercore ISI -- Analyst

Matthew Taylor -- UBS -- Analyst

Kyle Rose -- Canaccord Genuity -- Analyst

Ryan Zimmerman -- BTIG -- Analyst

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