Zimmer Holdings Inc.’s (ZMH) second-quarter profit slid 21% on higher charges and lower margins, although the maker of orthopaedic products such as knee implants and spinal devices posted improved sales across nearly all regions and product lines.
Ahead of Zimmer’s report, results from a smaller rival Biomet Inc. sent positive signals about the health of the joint-replacement market as it rebounds from a slowdown during the recession. But Johnson and Johnson (JNJ) sent less robust signals on Tuesday, saying its orthopedics unit continues to see pressure on product prices and Stryker Corp. (SYK) reported revenue growth that fell short of Wall Street’s expectations.
Still, research firm Susquehanna last month said the next decade looks to be a major boom for the entire industry, with the first wave of baby boomers now reaching Medicare eligibility. The firm said the 65 and older crowd is the primary demographic for joint reconstruction, while noting additional factors including longer life expectancy and the worsening obesity epidemic should also improve penetration.
On Thursday, Zimmer posted a profit of $165.5 million, or 82 cents a share, down from $210.1 million, or 98 cents a share, a year earlier. Excluding items such as acquisition-related charges and claims costs in the latest quarter, earnings rose to $1.09 from $1 while net sales increased 3.7% to $1.06 billion.
Analysts polled by Thomson Reuters expected a profit of $1.05 on revenue of $ 1.07 billion.
Gross margin fell to 76.3% from 76.8%.
Sales in the Americas, which comprises a bulk of the total, climbed 3%. Europe posted a 1% decline, while Asia Pacific had growth of 15%.
Sales in knee products, its largest unit by revenue, jumped 4% and sales increased 3% at its hip products.
Shares of Zimmer, which reiterated its 2010 outlook, were inactive premarket after closing Wednesday at $52.97.
-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com
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