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Will Zimmer (ZMH) Miss Earnings Estimates this Quarter?

Zacks Equity Research

Zimmer Holdings Inc. (ZMH) is scheduled to report its third-quarter 2014 results before the opening bell on Oct 23. Last quarter, the company had delivered a positive earnings surprise of 0.68%. Let’s see how things are shaping up for this announcement.

Factors at Play

Notably, Zimmer has positively surprised earnings in all of the last four quarters with an average beat of 1.66%.

Zimmer reported a mixed second-quarter 2014 with a bottom-line beat and a top-line miss. Barring the Americas, we are encouraged by the overall sales growth in the other geographies which acted as a major upside for the company.

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However, Zimmer lowered the higher end of its 2014 adjusted earnings guidance to the range of $6.00–$6.10 from the earlier band of $6.00–$6.20. We are also skeptical about the European Union's antitrust decision to once again question the $13.4 billion Zimmer-Biomet deal.

Zimmer has been witnessing a downward trend in earnings estimate revisions over the past three months. For 2014, six estimates moved down in the past 90 days, with no upward revision. Likewise, for 2015, five estimates moved down, with no positive estimate revisions.

Consequently, over the last three months, the Zacks Consensus Estimate for both the current quarter and 2014 earnings have moved south. The Zacks Consensus Estimate for the third quarter has declined 4.4% to $1.30, while the same for 2014 has dropped 1.3% to $6.05 over the said time frame.

Earnings Whispers?

Our proven model does not conclusively show that Zimmer is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for Zimmer is -0.77% since the Most Accurate estimate stands at $1.29, while the Zacks Consensus Estimate is pegged higher at $1.30.

Zacks Rank: Zimmer has a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are three companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Pacific Biosciences of California, Inc. (PACB) has an earnings ESP of +36.84% and a Zacks Rank #1 (Strong Buy). Pacific Biosciences will report third-quarter earnings on Oct 23.

Medivation, Inc. (MDVN) has an earnings ESP of +13.46% and a Zacks Rank #1. Medivation, Inc. is expected to report its third-quarter earnings on Nov 11.

bluebird bio, Inc. (BLUE) has an earnings ESP of +5.77% and a Zacks Rank #2 (Buy). bluebird bio is scheduled to report its third-quarter earnings on Nov 13.

Read the Full Research Report on ZMH
Read the Full Research Report on MDVN
Read the Full Research Report on PACB
Read the Full Research Report on BLUE


Zacks Investment Research