Stryker Corp.'s (SYK) second-quarter earnings rose 9.5% behind surging sales in the company's hospital-products unit, but replacement hip and knee sales barely edged higher as Stryker waits for new products to take off and rides out some disruptions overseas.

Overall sales missed Wall Street expectations due to the weak orthopedic implant results, but the Kalamazoo, Mich., company still maintained its full-year forecasts for both sales and per-share earnings growth.

The sluggishness among replacement joints came on the heels of Johnson & Johnson's (JNJ) report early Tuesday that showed decelerated hip and knee growth in its DePuy franchise--a major Stryker competitor--compared with first-quarter growth. J&J also cited continued pressure on product prices.

While smaller rival Biomet indicated favorable trends in its recent fiscal quarter report, which ran through May, Tuesday's reports suggested that an orthopedics market vulnerable to patients deferring surgery when economic times are tight could be hitting speed bumps again. The market has been working its way back from a slowdown in U.S. procedures during the recession.

"Maybe the recovery has kind of stalled out a bit," said Derrick Sung, a Sanford Bernstein analyst. "It does look like the hip and knee market surprisingly slowed down."

Stryker shares declined 3.5% to $49.50 in after-hours trading Tuesday. Shares of rival Zimmer Holdings Inc. (ZMH), where replacement-joint sales are a higher portion of revenue, fell 3.3% to $53.30.

Stephen P. MacMillan, Stryker's chairman and chief executive, acknowledged that "headline numbers" may fan worries about the market's health, but he said Stryker isn't that concerned. The company pointed to some company-specific issues it expects to resolve in coming quarters, such as the fact some new hip products haven't had a big impact yet. Additionally, the company is still feeling the effects from some late 2009 restructuring moves in Europe, where it discontinued certain products and also terminated some distributors.

"I think we feel better than the numbers for this particular quarter suggest," and feel good about longer-term trends, MacMillan said on a conference call.

With the anniversary of the European distributor and product moves coming up, "we are confident in improving performance," Chief Financial Officer Curt Hartman added during the call.

In the latest quarter, Stryker posted a profit of $319 million, or 80 cents a share, up from $291.3 million, or 73 cents a share, a year earlier. Sales grew 7.6% to $1.76 billion, or 6.9% excluding currency changes.

Analysts surveyed by Thomson Reuters expected a profit of 80 cents on revenue of $1.78 billion.

Gross margin rose to 69.3% from 67.2%.

Sales in the MedSurg business jumped 16%, marking a continued rebound from a lull caused by hospitals cutting back on purchases of items like beds and stretchers due to the weakened economy. But sales of orthopedic implants rose just 2.2%. A gain of 1.4% excluding a modest favorable currency impact compares with an RBC Capital Markets Forecast for about 7% growth in the quarter.

MacMillan said the company was particularly pleased with MedSurg results. "On the flip side, our reconstructive implants business was below our expectations in the quarter," he said during the call. He added that Stryker's international business struggled more than expected.

He also called a low single-digit increase in U.S. implant sales "discouraging," and that the market looks a little softer, although he's not concerned about market problems.

Stryker continued to forecast that sales will increase by 5% to 8% this year, excluding the impact of currency. It also continues to forecast earnings of $3.20 to $3.30 a share.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

(John Kell contributed to this article.)
Biomet (NASDAQ:BMET)
Historical Stock Chart
From Mar 2024 to Apr 2024 Click Here for more Biomet Charts.
Biomet (NASDAQ:BMET)
Historical Stock Chart
From Apr 2023 to Apr 2024 Click Here for more Biomet Charts.