Plenty of Strength in Zimmer
By Billy Fisher
October 25, 2007
Recommended (7)
After issues related to a Department of Justice investigation involving Zimmer Holdings (NYSE: ZMH) and orthopedic competitors Johnson & Johnson (NYSE: JNJ), Stryker (NYSE: SYK), and Smith & Nephew (NYSE: SNN) were finally resolved, Zimmer gave shareholders something else to ponder yesterday: lowered Q4 guidance.
The company's Q3 results weren't all that shabby, and I respect management's transparency about the lowered guidance, but the news did trip up shareholders, with shares of Zimmer trading down more than 14% today. The company revised its Q4 adjusted earnings per share guidance from $1.16 to a range of $1.03 to $1.05; management said it expects lower sales, and that contributed to most of the revision.
Zimmer's adjusted EPS for the third quarter increased 18% over the year-ago quarter, as net sales increased by 10%. Its knee implant business, which now accounts for 42% of net sales, experienced a 12% jump versus the year-ago quarter. The company's second-biggest line, hip implants, also posted respectable growth of 8% for the quarter.
The pullback in the share price is understandable, given previous expectations for Zimmer's Q4. However, the results for Q3 were solid, and the company as a whole has performed extremely well since it was spun off by Bristol-Myers Squibb (NYSE: BMY) back in 2001. The fact that Zimmer has repurchased about 2.4% of its outstanding common shares this year indicates that the company thinks shares are reasonably valued. While the fourth-quarter view had to be adjusted, I don't think this stock is in need of a wheelchair just yet.
For related Foolishness:
Want to make money in up, down, and rollercoaster markets? Find out how. Claim your private invitation to a breakthrough new service from Motley Fool Co-founder David Gardner and team. Simply enter your email below.
Terms & Conditions
RSS Headlines
Fool UK