Zimmer posts slightly weaker earnings, shares dip

Thu Jan 31, 2013 10:37am EST

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(Reuters) - Zimmer Holdings Inc (ZMH.N) on Thursday reported slightly weaker quarterly net earnings as the orthopedic device maker continued to trim costs.

The maker of orthopedic implants, surgical instruments, spinal and dental devices also provided an outlook for the full year that was within Wall Street's expectations, though some analysts were skeptical.

Shares dipped $1.27 to $73.16 in early trading on the New York Stock Exchange, following a 20 percent advance over the past 6 months.

Fourth-quarter net earnings were $152.8 million or 88 cents per share, compared with $156.6 million, or 87 cents per share. There were fewer shares outstanding this year.

Excluding items, adjusted earnings were $1.51, which beat the average estimate on Wall Street of $1.49, according to Thomson Reuters I/B/E/S.

Sales were $1.18 billion in the quarter, up from $1.17 billion a year before.

Zimmer said it expected full year earnings, excluding items, to be between $5.65 and $5.85 per share, bracketing the Thomson Reuters I/B/E/S estimate of $5.73.

The company said it expects sales to rise 2.5 percent to 4.5 percent in 2013, which also meets the Thomson Reuters I/B/E/S sales estimate of $4.63 billion.

Zimmer executives told analysts on a conference call that they should focus on the midpoint of the outlook.

David Roman, an analyst with Goldman Sachs, said the forecast implies improving markets, an assumption with which he agrees, but also implies strong adoption of its new products.

"We question this," he said in a research note to clients.

"It seems early to conclude that new products can have a material impact on the revenue outlook. The ramp will likely be slow, as the company trains physicians, gets instrument sets into the field, and secures hospital contracts," said Roman, who has a "neutral" rating on the stock.

"Execution also needs to improve, as we would have expected better results out of Zimmer given the acceleration in overall orthopedic volumes this quarter," he added.

(Reporting By Debra Sherman; Editing by Gerald E. McCormick, Nick Zieminski and Kenneth Barry)

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