Bioscience and Health Care & Life Sciences and Life Science & Biotech

Zimmer's earnings slip, but beat expectations

January 31, 2013

Fourth-quarter profit fell 2 percent at Zimmer Holdings Inc. due to large accounting charges, but still beat estimates of Wall Street analysts.

And the Warsaw-based maker of orthopedic implants predicted revenue and profit will pick up steam in 2013.

Zimmer earned $152.8 million, or 88 cents per share, in the quarter. The company took a $96 million charge to write down the value of its U.S. spine business, which it says is pressured by lower utilization and lower prices.

Excluding that charge and $69 million in other special charges, Zimmer would have earned $1.51 per share. Analysts expected $1.49, according to a survey by Thomson Reuters.

Revenue grew 1 percent, to $1.18 billion, also edging out analyst predictions of $1.17 billion.

Growth was stronger in North America and South America, where sales rose 4 percent. Sales of hip implants rose 2 percent and sales of trauma implants, 10 percent. But sales of knees were flat and sales of spine implants fell 5 percent.

For 2012, Zimmer profit fell 1 percent, to $755 million, from the previous year. Excluding special charges, the company would have earned $932.5 million, an increase of 3 percent.

Revenue totaled $4.47 billion, virtually unchanged.

“For the fourth quarter and full year, Zimmer delivered on our financial commitments, generating double-digit growth in adjusted earnings per share and significant operating margin improvements,” CEO David Dvorak said in a prepared statement.

Zimmer said it expects revenue to grow this year by 2.5 percent to 4.5 percent, when adjusted for foreign currency fluctuations. It also expects earnings per share, excluding special charges, to range between $5.65 and $5.85.

Those results would mark growth of 7 percent to 10 percent over last year’s adjusted earnings per share of $5.30.

Wall Street analyst have said 2013 could be a “breakout” year for Zimmer, which has suffered through several years of slow growth. However, they also worry the company is more exposed than its peers to changes coming in 2014 from the U.S. Patient Protection & Affordable Care Act.

Zimmer shares have risen 23 percent in the past 12 months. They were down about 1 percent Thursday morning, to $73.58 each.
 

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