With only a few exceptions, Stryker (NYSE:SYK) has long been one of the dependable growers in med-tech land. Looking over the just-reported second-quarter results, it appears that this orthopedic company continues to deliver the goods for shareholders.
Total sales rose about 15% on a constant-currency basis in the second quarter. Orthopedic implant sales climbed almost 13%, and MedSurg product sales grew 21%. Margins expanded once again, and the company posted an almost 21% improvement in net income.
The core orthopedic business was a bit of a mixed bag. Global hip sales were pretty soft, especially in the U.S. (2%). With knees, though, the story is much better -- global sales climbed 14%, and all regions posted double-digit sales increases. The trauma and spine businesses also grew quite strongly for the quarter.
Over the long haul, it seems that knees, not hips, are going to be the bigger growth story. While obesity isn't good for any lower extremity joints, it apparently wears harder on the knees than on the hips. This also happens to corroborate what I've heard from a few older orthopedic surgeon sources -- they're seeing younger and heavier patients on their operating tables and operating on more knees than hips relative to the past.
Looking at some odds and ends, operating cash flow has doubled on a year-to-date basis, and the company has thus far generated some respectable free cash flow. Elsewhere, the company continues to pour money into R&D. Although I'll grant that spending on R&D is no guarantee of future success, it seems to have worked in the past for Stryker, and I'm pleased to see that the company is not skimping here.
There will be bumps along the way, but Stryker is an interesting large-cap growth play. Hospitals are fighting back on pricing, the government is investigating the industry, and competitive pressures can be intense, but I have faith in Stryker's impressive array of products, top-notch research, and dependable history of earnings growth.
More takes on the orthopedic industry await below:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
