UPDATE 3-Zimmer net slips as hip, spine devices weigh

* Adjusted EPS $1.12 vs. Wall Street view of $1.08

* Sales rise 7.5 percent, led by growth in knees

* Sees 2010 profit $4.15-$4.35/shr vs. Street’s $4.28

* Shares fall 4.6 percent
(Recasts; adds analyst comments, earnings details, background,
share activity)

By Susan Kelly

CHICAGO, Jan 28 (BestGrowthStock) – Orthopedic implant maker Zimmer
Holdings Inc (ZMH.N: ) said on Thursday quarterly net earnings
declined 7 percent on higher operating expenses and soft hip
and spine device sales, and its shares fell nearly 4.6
percent.

Investors hoped for stronger sales growth as the orthopedic
market recovers from a slowdown in procedures after patients
postponed surgery in the economy downturn.

“Many had been hoping the hip and knee business would
continue to to show a nice rebound, but the outlook is
mid-single-digits” growth, said Jefferies & Co. analyst Raj
Denhoy. “The spine business slowed more dramatically than
anybody thought it would,” he added.

Investors were similarly disappointed in quarterly results
from rival Stryker Corp (SYK.N: ) earlier this week, sending its
shares down 1 percent.

Zimmer’s sales of its reconstructive knee joints rose 6
percent, but hip sales were flat and spine device sales fell 15
percent, excluding foreign currency (Read more about trading foreign currency. translation.

Shares of Zimmer and Stryker were strong performers in the
latter half of 2009 as the orthopedics markets showed signs of
a rebound along with the economy.

“Expectations were high going into this quarter,” said J.P.
Morgan analyst Mike Weinstein. “These results put Zimmer below
market in hips and in line with the market in knees.”

Warsaw, Indiana-based Zimmer’s fourth-quarter net earnings
were $155.2 million, or 74 cents a share, compared with $167.5
million, or 75 cents a share, a year earlier.

Earnings excluding special items were $1.12 per share,
compared with the average analyst estimate of $1.08 per share,
according to Thomson Reuters I/B/E/S.

Net sales increased 7.5 percent to $1.11 billion. Excluding
the positive impact of foreign currency (Read more about trading foreign currency. translation, sales rose
2.5 percent, boosted by growth in knee replacement joints in
Asia and the Americas that offset softness in demand for hips,
the company said.

Better sales volumes, helped by new product introductions,
were helping counter lower overall pricing trends, company
executives said on a conference call.

Zimmer forecast a decline of 1 percent to 2 percent in the
prices of reconstructive joints in 2010.

Hospitals, hurt by lower admissions as patients lost their
jobs and insurance coverage in the recession, are putting more
pressure on orthopedic device makers to lower prices. At the
same time, European markets are slowing due to government
budget constraints.

“Pricing pressure continues to build for these companies,”
Denhoy said. “The recovery got all priced in. As you look at
2010, it’s more of the same, so you are already paying for
that. It’s going to be a while before you see these stocks tick
up again.”

Zimmer forecast full-year 2010 earnings excluding items of
$4.15 to $4.35 per share on revenue growth of 4 percent to 6
percent, or 3 percent to 5 percent on a constant currency
basis.

Analysts on average were expecting Zimmer to earn $4.28 per
share, according to Thomson Reuters I/B/E/S.

Zimmer shares fell $2.77, or 4.6 percent, to $57.12 in
morning trading on the New York Stock Exchange. Stryker shares
fell $1.02, or 2 percent, to $52.89.

Investment Advice
(Reporting by Debra Sherman and Susan Kelly, editing by Dave
Zimmerman and Derek Caney)

UPDATE 3-Zimmer net slips as hip, spine devices weigh