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Stryker faces headwinds from US tax law revamp

Stryker Corp. CEO Kevin Lobo expects the new U.S. tax law to create headwinds for the company in 2018.

Despite this, due to "strong top line and operating margin expansion," the company is targeting full-year EPS of $7.07 to $7.17, Lobo said on the company's earnings call for the fourth quarter of 2017.

"In prior years, we've revised both our sales and EPS. And in 2017, that was despite facing a lot of challenges. We still did raise our EPS. You should look at 2018 no differently," the executive said.

The U.S. surgical implant maker took a $38 million unfavorable charge to its U.S. deferred tax assets related to changes associated with the tax overhaul as of Dec. 31, 2017. Additionally, a liability of about $785 million was recorded associated with future tax payments on previously deferred foreign earnings and profits.

Michigan-based Stryker expects a modest increase in its 2018 effective tax rate, but certain provisions concerning taxation of income streams from foreign units are expected to have a negative impact on the tax rate, more than offsetting the benefit related to the reduction in the U.S. federal corporate tax rates.

Therefore, the company expects its adjusted effective tax rate in 2018 to be in the range of 16.5% to 17.5%.

In addition, the medical equipment maker adjusted its capital spending forecast for 2018 as it continues to invest in its operations and IT infrastructure.

Total capital expenditure for 2018 could be between $550 million and $600 million. This compares to roughly $600 million of capital expenditure in 2017.