Barclays on Medical Supplies & Devices: Unchanged Ortho Market Dynamics
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Rating Summary:
33 Buy, 13 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 6 | Down: 5 | New: 3
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Barclays on Medical Supplies & Devices: Unchanged Ortho Market Dynamics
Analyst, Adam Feinstein, said, "Biomet's call largely spoke to continued challenges in the ortho markets (it appears there was little change in market conditions sequentially). Going into the quarter, we believe investors were anticipating a pick up in Biomet's growth due to easier comps; however, overall growth (flat) was relatively in-line with last quarter's 1% decline as "the story has been a combination of a soft market and Biomet coming back to market growth". Volume and pricing trends appeared stable sequentially (albeit at weak levels with Europe "a little softer" in large joint recon). Net-net, Biomet thinks it grew roughly in-line with the market, which would imply flat 3Q hip & knee market growth, unchanged from last quarter. Looking forward, Biomet believes that the market will be "at least stable" or may improve "ever so slightly". Given what we believe are low expectations for Stryker (NYSE: SYK) and Zimmer (NYSE: ZMH), we view these comments as a relief and think that both SYK and ZMH will likely grow slightly above hip and knee market growth in the 3Q11."
"Biomet's FY1Q12 results indicated continued weakness in its core recon as well as spine and trauma markets. Knees declined 2% ex-fx, ticking down 100 bps sequentially, and grew below our flat estimate, while hips were up 2% ex-fx, accelerating from flat ex-fx growth sequentially and above our flat assumption. Biomet is the first orthopedic manufacturer to report CY3Q11 results, and we highlight that the flat growth in core recon and declines in spine and trauma point to continued weakness in ortho market fundamentals. Despite this, Biomet results have not served as a strong leading indicator for SYK and ZMH in recent quarters, as SYK and ZMH have been taking share in hips and grown in line with the market in knees, trends we expect to continue in the 3Q."
Analyst, Adam Feinstein, said, "Biomet's call largely spoke to continued challenges in the ortho markets (it appears there was little change in market conditions sequentially). Going into the quarter, we believe investors were anticipating a pick up in Biomet's growth due to easier comps; however, overall growth (flat) was relatively in-line with last quarter's 1% decline as "the story has been a combination of a soft market and Biomet coming back to market growth". Volume and pricing trends appeared stable sequentially (albeit at weak levels with Europe "a little softer" in large joint recon). Net-net, Biomet thinks it grew roughly in-line with the market, which would imply flat 3Q hip & knee market growth, unchanged from last quarter. Looking forward, Biomet believes that the market will be "at least stable" or may improve "ever so slightly". Given what we believe are low expectations for Stryker (NYSE: SYK) and Zimmer (NYSE: ZMH), we view these comments as a relief and think that both SYK and ZMH will likely grow slightly above hip and knee market growth in the 3Q11."
"Biomet's FY1Q12 results indicated continued weakness in its core recon as well as spine and trauma markets. Knees declined 2% ex-fx, ticking down 100 bps sequentially, and grew below our flat estimate, while hips were up 2% ex-fx, accelerating from flat ex-fx growth sequentially and above our flat assumption. Biomet is the first orthopedic manufacturer to report CY3Q11 results, and we highlight that the flat growth in core recon and declines in spine and trauma point to continued weakness in ortho market fundamentals. Despite this, Biomet results have not served as a strong leading indicator for SYK and ZMH in recent quarters, as SYK and ZMH have been taking share in hips and grown in line with the market in knees, trends we expect to continue in the 3Q."
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