) reported third quarter 2013 adjusted earnings per share of
$1.25, up 8.7% year over year, and a penny higher than the Zacks
Consensus Estimate. After including one-time items, the company
reported net earnings of $154.4 million or 90 cents a share, down
13.3% or 11.8% year over year, respectively.
In the third quarter, revenues stood at $1,074.3 million, up
4.8% (up 6.7% at constant exchange rates or CER) year over year,
beating the Zacks Consensus Estimate of $1,063 million. Revenues
generated in the Americas were $633 million (up 9% year over year
at CER). The figure in Europe stood at $255 million (up 1% at
CER) and in Asia-Pacific at $186 million (up 8%).
Zimmer's biggest segment, reconstructive implant, recorded
revenues of $788 million, up 6% year over year at CER. This was
due to an increase of 8% in the Americas combined with a 7%
increase in Asia Pacific. Sales in Europe remained flat on a
Revenues derived from Knees (within Reconstructive) were up 7%
year over year at CER to $435 million, while Hips recorded an
increase of 2% year over year to $308 million. Revenues from
Extremities increased 15% year over year to $45 million.
Among the other segments at Zimmer, spine recorded a decline
of 3% at CER to $48 million in the reported quarter.
Zimmer's gross margin contracted 567 basis points (bps) to
69.4% in the third quarter. Selling, general and administrative
expenses increased 1.9% to $438 million while research and
development expenses were down 7.7% to $49.4 million. Adjusted
operating margin contracted 389 bps to 24.0%.
Zimmer exited the third-quarter 2013 with cash and cash
equivalents and short-term investments of $1,505.8 million
compared with $1,555.9 million as of 2012. Long-term debt
decreased marginally to $1,686.0 million compared with $1,720.8
million at the end of 2012.
Year-to-date operating cash flow for the reported quarter was
$662.9 million compared to $783.9 million in the year-ago period.
The company repurchased 0.2 million shares for $17.5 million
during the quarter and is currently left with $536.4 million of
share repurchase authorization, under the current program that
expires on Dec 31, 2014. The company also declared cash dividends
of $33.9 million in the second quarter.
Zimmer narrowed its adjusted EPS outlook to $5.70, the lower
end of its earlier provided range of $5.70−$5.80. The company
reaffirmed its revenue outlook at 4.5% at CER. The Zacks
Consensus Estimate for EPS of $5.74 falls within the given range.
The Zacks Consensus Estimate for revenues stands at $4.59
The currency movement is expected to lower revenues by 1.5% to
2.0% (previously expected at 2.0%), which in turn would lead to
2.5% to 3% revenue growth on a reported basis (earlier guided
range was 2% to 3%).
Zimmer provided a decent third quarter with both top-line and
bottom-line beats. Barring spine revenue, which continues to
remain as a key disappointment, we are encouraged with the
balanced segmental sales growth which acted as a major upside for
Zimmer constantly tries to strengthen its pipeline with the
launch of new products. The company currently offers a broad line
of reconstructive implant and trauma products as well as
orthopedic surgical instruments and supplies. We believe that the
company has embarked on its growth trajectory with new product
launches, employment of new technologies and expansion into the
Currently, Zimmer carries a Zacks Rank #3 (Hold). Medical
products companies such as
Align Technologies Inc.
Mindray Medical International Ltd
Bio-Rad Laboratories, Inc.
), with a Zacks Rank #1 (Strong Buy), are worth considering.
ALIGN TECH INC (ALGN): Free Stock Analysis
BIO-RAD LABS -A (BIO): Free Stock Analysis
MINDRAY MEDICAL (MR): Free Stock Analysis
ZIMMER HOLDINGS (ZMH): Free Stock Analysis
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