Medical technologies major
) is slated to report its second quarter fiscal 2012 results after
the closing bell on Wednesday, October 17. The current Zacks
Consensus Estimate for the second quarter is 98 cents, representing
estimated year-over-year growth of 7.79%.
STRYKER CORP (SYK): Free Stock Analysis Report
ZIMMER HOLDINGS (ZMH): Free Stock Analysis
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Second Quarter Flashback
Stryker's second-quarter 2012 adjusted earnings per share of 98
cents was in line with the Zacks Consensus Estimate and exceeded
the year-ago earnings of 90 cents a share. The Michigan-based
orthopedic devices major's profit (as reported) increased 4.8% to
$325 million (or 85 cents a share) in the quarter on the back of
higher domestic sales and margin expansion.
Revenues increased 2.9% (up 5% in terms of constant currency) year
over year to $2,106 million, but fell short of the Zacks Consensus
Estimate of $2,129 million. Revenues were driven by healthy sales
across its three segments in the U.S., partially offset by a weak
European economy and currency fluctuations.
Sales from the company's core Reconstructive unit inched up 1.2% in
the quarter to $927 million led by acquisitions in the trauma and
extremities franchise. Hips and Knees sales disappointed in the
quarter and the company expects continued pricing pressure in these
segments. The company further expects weak European sales to
adversely affect global reconstructive sales for the full year.
MedSurg sales increased 1.7% (up 3.3% in constant currency) to $786
million in the quarter, supported by gains from Sustainability
Solutions and Instruments sales. Stryker's Neurotechnology and
Spine business jumped 10.1% (up 12.3% in constant currency) to $393
million, driven by the Orthovita and Concentric acquisitions, which
offset the weak results of the core Spine business.
Estimate Revisions Trend
Estimates for the third quarter hardly demonstrate any activity
over the past week and month. The past 7 days have seen none of the
twenty three estimates change for the quarter in either direction.
The past 30 days have seen one of twenty three estimates fall for
the quarter, and none moving in the opposite direction.
The past 7 days have seen one of twenty five estimates rise for the
full year 2012 move north, while none moving in the opposite
direction. The past 30 days have seen one of twenty five estimates
rise for the year, and one estimate moved in the opposite direction
in the same period.
The magnitude of revisions, for the forthcoming quarter, has hit a
plateau over the last week and month. The estimate for 2012 has
also not moved over the prior week and month.
With respect to earnings surprises, Stryker has posted one positive
surprise in the preceding four quarters while it met the Zacks
Consensus Estimate on the other three occasions. The company has
produced an average positive earnings surprise of 2.25% over the
last four quarters, implying that it has surpassed the Zacks
Consensus Estimate by that measure. Third quarter earnings are also
expected to meet expectations.
With a market-cap of $19.9 billion, Stryker is one of the world's
largest medical device companies operating in the global orthopedic
market. Despite a soft orthopedic market and Medsurg end-market
pressure, the company's well-diversified product portfolio along
with solid business fundamentals is expected to drive future
Further, expansion into fast-growing international markets via
strategic acquisitions and new product launches represent
attractive growth opportunities. Moreover, the company remains
committed to delivering incremental returns to investors leveraging
its solid balance sheet, healthy free cash flow and earnings power.
However, Stryker faces several challenges, which include a still
soft U.S. and European economy, the upcoming Med-tech tax, tough
hospital capital budgets, weak foreign exchange and pressure from
Weakness in the reconstructive business as well as in knees and
spine sales might negatively affect Stryker. Additionally, Stryker
operates in the highly competitive orthopedic industry and faces
strong competition from players like
Zimmer Holdings Inc.
We expect the company to provide some light on the pricing/volume
as well as capital spending trend in its third quarter commentary.
Our Neutral recommendation on Stryker carries a short-term Zacks #3