Management at No. 4 orthopedics company Biomet
And it's not as though this is really a major surprise. I've been writing for some time now that orthopedics companies like Biomet, along with Stryker
For the second quarter, Biomet's sales were up just 8%. Even if you give credit to the notion that hurricanes hurt the business (and that makes sense, given that a lot of seniors live in the Southeast and are the company's prime customers), adding back the reportedly lost business would only pump revenue growth up to about 9.5%. While reconstruction sales weren't bad -- those for hips were up 11% and knees were up 13% worldwide -- the fixation, stimulation, and spinal businesses were pretty soft.
Margins also took something of a hit (on an adjusted basis). This is primarily due to Biomet's decision to launch a direct-to-consumer marketing campaign. It'll be interesting to watch just how well this works and whether patients really do end up asking for Biomet implants by name.
Simply put, this was a tough quarter, and the next one isn't looking fantastic either. But that doesn't mean that investors should permanently delete Biomet from their watch lists. Personally, I think the company's plan for price increases is a little optimistic, especially while everyone else seems to be cutting prices, but I do like the business.
The trick, though, is that I'm not sure we've seen the bottom in orthopedics yet. Stocks in the space have come up about 10% off of their bottoms, but as Biomet is showing Wednesday, we're not necessarily at the "all clear" point just yet. In the past, there have been times when investors turned cautious on the sector and you could buy these shares at a mid-teens P/E. I'm not promising that we'll get there again, but I'm inclined to wait in the hopes of lower share prices yet to come.
Bone up with more orthopedic Foolishness:
Fools, now is the time to open your hearts and wallets to worthy causes! Please support our five Foolish charities at www.foolanthropy.com .
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).