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Zimmer Shares Slump on Forecast

OKLAHOMA CITY -- Zimmer (ZMH - Get Report) can't stop the pain.

Shares of the giant orthopedic device maker plunged Thursday after the company endured another miserable quarter -- with its crucial top-line results falling short of Wall Street targets -- as the company struggled to regain its footing following a government crackdown on its business practices. Third-quarter sales rose just 5% to $952 million, missing the $964 million consensus estimate, and would have inched up a mere 2% without help from foreign currency rates.

The company, which routinely boasted double-digit sales growth in the past, now expects sales to rise just 7% to 7.5% over the course of the full year.

Zimmer posted weak profit as well, as the company spent large sums to overhaul its compliance program. While net income rose nearly fivefold to $215 million in the third quarter, due to the absence of a year-ago settlement fee, adjusted earnings crept up a mere 1.4% in the period.

Zimmer did post adjusted earnings per share of 97 cents that beat the consensus estimate of 89 cents, but the market took little comfort in that.

"We are pleased with the considerable progress that we have made on our previously announced operating, infrastructure and compliance initiatives," Zimmer CEO David Dvorak stated early Thursday morning. "Although this transition is negatively impacting our operating results at this point, we are confident that our actions will position us to capture future growth opportunities represented by the markets we serve."

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