Zimmer Beats, Guides Lower

Sales rise 4%.
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Zimmer's

(ZMH)

first-quarter earnings jumped 18% from a year ago, easily beating estimates, as strong sales of its reconstructive orthopedics drove growth. The stock was hit, however, by soggy guidance.

Zimmer earned $205.6 million, or 82 cents a share, in the quarter, compared with $173.6 million, or 70 cents a share, a year ago. Excluding items including stock-options expense, Zimmer earned 86 cents a share in the quarter; the Thomson First Call consensus was for earnings of 81 cents a share.

Sales rose 4% to $860.4 million, missing the $875.1 million Thomson First Call consensus.

"Constant-currency sales were a little light at 7% growth versus our expectation of 8% -- however, the interest shown by surgeons at the AAOS meeting and our progress towards launching an unprecedented number of major new products throughout the second half of this year confirms our optimism," Zimmer said. "We believe we have the right strategy for innovation, and our position as the low-cost orthopaedic manufacturer and distributor should enable us to continue generating unmatched operating leverage and operating cash flow."

For the second quarter, Zimmer expects to earn 81 cents or 82 cents a share on an adjusted basis on year-over-year sales growth of 5% to 6%. Analysts were forecasting earnings of 83 cents a share in the period.

In the third quarter, Zimmer expects to earn 76 cents a share; analysts were forecasting 79 cents a share. For the fourth quarter, Zimmer expects to earn $1 a share; analysts were forecasting 96 cents a share.

Zimmer shares closed Wednesday at $65.74. In after-hours trading, they fell $2.49, or 3.8%, to $63.25.