Orthopedic medical devices company
Zimmer Holdings
(
ZMH
) will participate in the upcoming Bank of America Merrill Lynch
2012 Health Care Conference in Las Vegas, Nevada, on May 16,
2012.
Although the musculoskeletal market is witnessing several
challenges in the form of reduced procedure volume and pricing
pressure, Zimmer, based in Warsaw, Indiana believes that clinically
relevant and innovative products can still fetch premium pricing
and reimbursement.
Besides the focus on Reconstructive and Emerging businesses,
Zimmer is also exploring opportunities to expand its reach into
early intervention products. We expect the company to share its
views on the uptake of the newly launched products and future
plans.
Further, in an effort to streamline its business, Zimmer has
resorted to the restructuring route, which is expected to generate
annualized pre-tax savings of more than $100 million.
The various initiatives include management de-layering,
consolidation of sourcing activities and optimization across global
manufacturing network. To meet this objective the company plans to
source manufactured components to ensure highest quality, lowest
cost and optimal after-tax returns.
With economic uncertainty taking its toll on procedure volume in
both the US and Europe, companies are increasing their focus on
emerging markets and Zimmer is no exception. The company's
investments in these regions over the past several quarters to
improve operational and sales performance are yielding results.
With stabilization in the global economy, the growth in
procedure rate in the developing or emerging markets is on the
higher side because of lower penetration rates compared to the
developed markets. The stock retains a Zacks #2 Rank (Buy) in the
short term.
During 2012, Zimmer expects market condition to remain
challenging but relatively stable. Pricing is expected to decline
by 2% in 2012, worse than 2011. This guidance takes into account
the impact of bi-annual price cuts in Japan and the increase in
pricing pressure traditionally witnessed in the fourth quarter. The
headwinds currently at play in the orthopedic devices market have
also affected Zimmer's peers such as
Stryker Corporation
(
SYK
) and
Smith & Nephew
(
SNN
).
With more than three months into the year, we expect the company
to provide some input regarding the current market dynamics. As the
situation gradually improves, Zimmer is well poised to reap the
benefits of a strong portfolio and a wide geographical reach. Over
the long term, we are Neutral on Zimmer.
SMITH & NEPHEW (
SNN
): Free Stock Analysis Report
STRYKER CORP (
SYK
): Free Stock Analysis Report
ZIMMER HOLDINGS (
ZMH
): Free Stock Analysis Report
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