Investors are looking for signs of improving demand for elective procedures such as hip and knee implants as the economy slowly strengthens. Stryker said the market has stabilized but stopped short of predicting a rebound in the market, which is in the second year of a slowdown.

"We did not see any meaningful acceleration in volumes during the quarter. Rather, the environment appears stable," Stryker Vice President Katherine Owen told analysts on a conference call.

The company said the search continues for a permanent replacement for former Chief Executive Stephen MacMillan, who stepped down suddenly in February for family reasons. Chief Financial Officer Curt Hartman, who is serving as CEO in the interim, said the company's board was comfortable with the pace of the search effort.

Stryker's first-quarter net earnings rose to $350 million, or 91 cents a share, from $307 million or 78 cents a share a year ago. Net sales increased 7.2 percent to $2.16 billion.

Excluding special items, the Kalamazoo, Michigan-based company said it earned 99 cents a share, in line with the average analyst estimate according to Thomson Reuters I/B/E/S.

Sales of replacement knee joints increased 5.1 percent to $352 million in the quarter. Hip sales rose 3.3 percent to $312 million. Sales in the medical equipment and surgical instruments business climbed 7.5 percent to $821 million.

"All three segments did better than expected. I think overall investors will be happy from the top-line perspective," said Edward Jones analyst Aaron Vaughn.

"We're not calling this the turn in the market at this point, but this is good news for the orthopedic space in general," he said.

Stryker said it continues to expect 2012 sales growth of 2 to 5 percent, excluding the impact of currency fluctuations and acquisitions, and double-digit earnings-per-share growth over 2011.

Hip and knee prices continued to trend lower at a low-single-digit rate, the company said, and it expects continued pressure on pricing in the year ahead.

(Reporting By Susan Kelly in Chicago; Editing by Andre Grenon, Matthew Lewis and Bob Burgdorfer)

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