Will SYK's Q2 Earnings Reflect Strong Growth Despite Tariff Overhang?

Stryker Corporation SYK is scheduled to release second-quarter 2025 results on July 31, after market close. In the last reported quarter, the company delivered an earnings surprise of 4.03%.

Q2 Estimates

The Zacks Consensus Estimate for earnings is pegged at $3.06 per share, indicating an increase of 8.9% year over year.

The consensus mark for revenues is pinned at $5.96 billion, implying growth of 9.9% from the prior-year reported figure.

Factors to Note

Stryker delivered robust 10.1% organic revenue growth in the first quarter of 2025, supported by procedural momentum and successful new product launches. While management anticipates full-year organic growth of 8.5-9.5%, the performance in the second quarter is expected to have remained healthy, driven by consistent capital demand, Mako utilization, and new product adoption across its Orthopaedics and MedSurg portfolios.

Top-line strength is likely to have benefited from continued Mako robotic-assisted surgery momentum, particularly in hips and knees, which saw record installations during the first quarter amid rising global utilization. Sales growth is likely to have been driven by strong performance across all segments.  Orthopaedics, hips and knees should have maintained high-single-digit growth, while trauma and extremities are likely to have been aided by strong demand for the Pangea plating system. Though the U.S. spinal implant business was divested earlier in the year, Inari Medical’s inclusion in the vascular portfolio should have partially offset the top-line impact.

In the MedSurg and Neurotechnology segment, capital-heavy businesses such as Medical, Instruments, and Endoscopy are expected to have sustained double-digit growth trends, supported by strong capital orders and elevated demand for devices like LIFEPAK 35 and the 1788 endoscopy camera. However, some lingering supply-chain disruptions in the medical business, previously flagged by management, might have led to a modest drag in the soon-to-be-reported quarter.

Stryker Corporation Price and EPS Surprise

Stryker Corporation price-eps-surprise | Stryker Corporation Quote

Meanwhile, recent launches likely played a key role in maintaining revenue momentum. The rollout of Mako 4, with an improved footprint and integration with the Q guidance system, must have supported continued placements. Similarly, LIFEPAK 35’s U.S. adoption and upcoming international expansion, along with Pangea’s ongoing U.S. rollout and pending international launches, are likely to have contributed meaningfully. Other new products, including Artix (from Inari), AlphaVent Knotless (sports med), and Oculan (OR lights), are building sales pipelines with potential to scale through the second half of 2025.

On the cost front, Stryker’s first-quarter gross margin expanded 190 bps to 65.5%, and operating margin rose 100 bps to 22.9%, aided by pricing discipline, manufacturing efficiencies and favorable mix. While the second quarter might have witnessed similar trends, management has warned of increasing cost pressures in the second half, particularly from newly imposed tariffs on imported components and devices. The company has estimated a $200 million annual tariff impact, with the initial effects likely to have impeded second-quarter performance. However, much of the burden is expected in the third and fourth quarters due to inventory cycling. Mitigating actions include pricing strategies, supply-chain optimization and operating discipline.

Adjusted EPS, which rose 13.6% to $2.84 in the first quarter, is likely to have remained strong in the second quarter as well. However, the growth might have moderated slightly due to higher interest expenses from the Inari acquisition and the early impact of tariffs. Nevertheless, continued top-line execution, favorable mix, and pricing tailwinds are expected to keep full-year 2025 EPS in range of $13.20-$13.45.

Our estimate for the MedSurg and Neurotechnology, and the Orthopaedics & Spine segments’ sales is pegged at $3.75 billion and $2.57 billion, respectively. U.S. and international sales are estimated to be $4.74 billion and $1.59 billion, respectively.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Stryker this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate is -0.17% for SYK. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3 at present.

Stocks Worth a Look

Here are some medical product stocks worth considering as these have the right combination of elements to post an earnings beat this reporting cycle.

GeneDx Holdings WGS has an Earnings ESP of +5.26% and a Zacks Rank #2 at present. The company is slated to release second-quarter 2025 results on July 29.

WGS’ earnings surpassed estimates in each of the trailing four quarters, the average surprise being 145.82%. The Zacks Consensus Estimate for second-quarter EPS suggests an increase of 190.9% from the year-ago quarter's figure.

Cencora COR has an Earnings ESP of +1.49% and a Zacks Rank #2 at present. The company is set to release third-quarter fiscal 2025 results on Aug. 6.

COR’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6%. The Zacks Consensus Estimate for COR’s fiscal third-quarter EPS implies a surge of 13.2% from the year-ago reported figure.

Cardinal Health CAH has an Earnings ESP of +0.72% and a Zacks Rank #2. The company is slated to release fourth-quarter fiscal 2025 results on Aug. 12.

CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 10.3%. The Zacks Consensus Estimate for the company’s fiscal fourth-quarter EPS reflects an increase of 10.3% from the year-ago quarter’s figure.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research