Wall Street is definitely a what-will-you-do-for-me-tomorrow kind of place. Yesterday is done, and investors are correctly looking forward to tomorrow. But for Zimmer (NYSE:ZMH), the question has instead become, "What will you do for me next year?"
The medical-devices company turned in fourth-quarter earnings of $1 per share, after adjusting for charges such as its acquisition of Abbott Labs' (NYSE:ABT) spine business. That's exactly what analysts were expecting, but the company's stock still dropped 12% Thursday, and it's down another 3% as I write today.
The culprit? Investors weren't impressed with the company's guidance. Actually, from the look of things, they hated it.
Revenue is expected to grow just 1% to 3% this year in constant currencies. But more than 40% of sales come from abroad, and today's stronger dollar will result in a 4% drag on revenue, if the exchange rate holds steady. That should wipe out all of the company's growth guidance, so it looks like revenue will actually fall in 2009.
Zimmer isn't the only one caught in a trap of a rising dollar -- fellow orthopaedic implant maker Stryker (NYSE:SYK) and health-care giant Johnson & Johnson (NYSE:JNJ) have both said revenue would be dragged down by 4% or so if currency rates stay at current levels. BostonScientific (NYSE:BSX) expects a headwind of only 2%, but that's because it hedges some of its currency risk.
That drag on the top line will hurt Zimmer's earnings this year. Its guidance of $3.85 to $4.00 per share trails the $4.05 per share in adjusted earnings that it managed last year.
The good news is that the headwind should eventually end -- hopefully sooner, rather than later. In the meantime, investors in these companies need to keep a weather eye out.
Further Foolishness:
- Biotech isn't so scary.
- And it can make you lots of money.
- But it's not the only way to make money.
