Recently, we reiterated our Neutral recommendation on Zimmer Holdings (ZMH) with a target price of $54.00.
Zimmer reported an adjusted EPS of $1.21 during the second quarter of fiscal 2011, surpassing the Zacks Consensus Estimate of $1.19 and $1.09 in the corresponding quarter of fiscal 2010. The company reported revenues of $1,137 million during the quarter, 7.5% higher than the year-ago period (2.1% at constant exchange rates, CER) and beating the Zacks Consensus Estimate of $1,129 million.
While revenues recorded from Americas remained unchanged at $608 million, revenues from Europe and Asia-Pacific increased 17% to $325 million and 19% to $204 million, respectively. The strong performance in international segments emphasizes the positive impact of the company’s investments in established markets as well as its expanding presence in emerging markets that provide long-term growth opportunities.
Zimmer’s biggest segment, Reconstructive Implant, recorded a 6% increase in revenue to $857 million driven by growth in Asia-Pacific (17% to $151 million), Europe (16% to $257 million), partially offset by a 2% decline in Americas to $449 million.
Among the other segments at Zimmer, barring Spine, which declined 3% to $56 million, growth was witnessed across all other businesses including Surgical and Other (13% annually to $88 million), Trauma (20% to $69 million) and Dental (20% to $67 million).
For the past few quarters, Zimmer has been investing in its product portfolio. The company expects some of its new products such as PSI, the MMC metal-on-metal hip cup and Continuum acetabular system along with the PRI for its NextGen Knee to continue to contribute to the growth ahead. The company’s broad product portfolio across all its segments continues to benefit its top line.
Zimmer experienced -0.9% of pricing pressure in the second quarter, a stable trend and in line with its expectations. For the entire company pricing pressure should remain at around -1%. Global economic conditions continue to impact procedural volumes. Moreover, the company faces tough competition from players like Smith & Nephew (SNN), among others.
We are currently Neutral on Zimmer.
