Zimmer Holdings Earnings: Margins Expand, Yet Misses Estimates on Profit and Revenue

Falling revenue did not prevent S&P 500 (NYSE:SPY) component Zimmer Holdings Inc. (NYSE:ZMH) from reporting a profit boost in the second quarter. Zimmer Holdings designs, develops, manufactures and markets orthopedic and dental reconstructive implants, spinal implants, and trauma products.

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Zimmer Holdings Inc. Earnings Cheat Sheet

Results: Net income for Zimmer Holdings Inc. rose to $214 million ($1.22 per share) vs. $203.8 million ($1.06 per share) in the same quarter a year earlier. This marks a rise of 5% from the year-earlier quarter.

Revenue: Fell 1.1% to $1.13 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Zimmer Holdings Inc. fell short of the mean analyst estimate of $1.32 per share. Analysts were expecting revenue of $1.14 billion.

Quoting Management: “In the quarter, Zimmer improved operating margins and delivered double-digit growth in adjusted earnings per share. This performance was driven by the ongoing benefits of our commercial and operational excellence programs and disciplined use of capital,” said David Dvorak, Zimmer President and CEO. “Moving through 2012, we expect to accelerate revenue growth through ongoing new product introductions and to continue to drive improved leverage in operating margins.”

Key Stats:

The company has now seen its net income rise for three quarters in a row. In the first quarter, net income rose 0.3% and in the fourth quarter of the last fiscal year, the figure rose more than fourfold.

A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the second quarter of the last fiscal year, which saw revenue rise 7.5%.

The company fell short of estimates last quarter after being in line with expectations the quarter before with net income of $1.30.

Margins were up in the first quarter, following a drop in the previous quarter. Gross margins grew to 74.9%, up 0.3 percentage point from the year-earlier quarter. In the fourth quarter of the last fiscal year, the figure rose 0.3 percentage point to 74.7% from the year earlier quarter.

Looking Forward: Analysts are pessimistic about the company’s results for the next quarter. The average estimate has fallen for the third quarter to $1.16 per share, down from $1.17 seven days ago. The average estimate for the fiscal year has remained at $5.27 per share.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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