Zimmer Beats, Guidance Reaffirmed
Zimmer Holdings (ZMH) announced a second-quarter fiscal 2010 EPS of 82 cents
, down 16.3% from 98 cents in the second quarter 2009. However, the adjusted EPS (excluding the charges anticipated associated with the suspension of an artificial hip replacement component) was $1.09, beating the Zacks Consensus Estimate of $1.05. EPS rose 9% from the year-ago earnings of $1.00.
Zimmer reported net sales of $1.06 billion, in line the Zacks Consensus estimate, but declined 3.7% from the year-ago quarter's $1.20 billion. The growth was seen across all the geographical segments with continued enhancement of the company's product lines during the quarter.
Barring Spine Products (10% drop to $57.9 million); growth was witnessed across all business segments at Zimmer. On an annualized basis, growth was recorded at Reconstructive Implant (4% to $808.2 million), Orthopedic Surgical Products (16% to $77.9 million), Trauma (2% to $57.8 million) and Dental (6% to $55.9 million). Consistent with the first quarter, Reconstructive Implants Segment revenue represented 76% of the total revenue.
On a geographic basis, revenue in Americas and Asia Pacific increased 3%, and 5% year over year to $609.3 million and $171.9 million, respectively. However, Europe experienced a revenue decline of 1% year over year to $276.5 million. In order to expand its presence in the Asia Pacific region, Zimmer inked an agreement to acquire Beijing Montagne Medical Device Co., a leader in the rapidly growing Chinese orthopedic implant market.
Gross profit soared 3% to $807.1 million in the reported quarter from $783.1 million in the second quarter 2009. Gross margin was 76.3% compared with 76.7% in the second quarter 2009. Operating expenses increased 19% year over year to $579 million.
Zimmer exited first-half fiscal 2010 with cash and cash equivalents of $953.7 million, an 37.8% rise from $691.7 as of December 2009. The company had a long-term debt of $1.13 billion at the end of the period consistent with the debt burden as of December 2009. The company generated $272.2 million of cash flow from operations in the second quarter, an increase of 39.8% year over year.
During the second quarter, under its existing share repurchase program of $1.25 billion, Zimmer utilized $85.4 million of cash to acquire 1.4 million shares, with $32.2 million of the authorization remaining available. It also approved an additional stock repurchase program of $1.5 billion, which expires on December 31, 2013.
Guidance
Zimmer has reiterated its sales and adjusted EPS guidance for fiscal 2010. Revenue is anticipated to grow between 3% and 5% on a constant currency basis. Adjusted EPS is expected in the range of $4.15 - $4.35. The current Zacks Consensus Estimate for 2010 is $4.26, marking an 8.2% year-over-year growth.
Zimmer Holdings offers a broad line of popular reconstructive implant and trauma products, as well as orthopedic surgical instruments and supplies. Presently, the company is highly exposed to pricing pressures, as well as the uncertain movement of foreign exchange.
Currently, we are Neutral' on Zimmer.
Zimmer Beats, Guidance Reaffirmed
By: Abhishek
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