Zimmer to Present at a Conference - Analyst Blog

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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.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: SNN , SYK , ZMH

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