It's convenient that Zimmer (NYSE:ZMH) and Smith & Nephew (NYSE:SNN) reported on the same day, because it allows for ready comparisons. Then again, just how similar is this big American orthopedics company to its smaller, British, and more diversified competitor? After all, Zimmer's reconstructive product revenue this quarter was more than Smith & Nephew reported in total.
Looking at the numbers for Smith & Nephew, and the movement in the market today, it seems that folks were impressed by some less-than-scintillating performance. Overall revenue grew about 6%, and margins did improve, but operating profit growth of 8% doesn't seem that special -- though it does fill a gap between Zimmer's rather pedestrian growth and Stryker's (NYSE:SYK) better performance.
Looking at the product categories, reconstruction is doing all right -- up 7% on the strength of some new knee products -- as is trauma. Endoscopy did OK as well, but wound management continues to be a sore spot, with no contribution to growth (though at least it wasn't down).
There are plenty of questions for Smith & Nephew today. Can a company with a pretty uninspiring record of internal R&D come up with its own products, or will it forever depend upon acquiring other people's good ideas? Will the Birmingham Hip Resurfacing system lead to real growth in the hip market, or will it fall behind rivals like Biomet (NASDAQ:BMET) and Zimmer? And what, if any, impact will the government investigation have on its operations and pricing?
Barring some major changes to the way this industry does business, orthopedics is still a good place to be. And though Smith & Nephew is more of an ancillary player today, perhaps the acquisition of a company like Biomet could put it on more competitive footing.
Smith & Nephew does seem to be performing better than many had forecast, and there is certainly potential with the Birmingham product, but when times get tough, my fancies generally turn to the leaders in the industry.
For more constructive Foolishness:
- Smith & Nephew Gets a Leg Up
- Zimmer Provides Quarterly Information, and More
- Stryker and the Terror of the Unknown
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
