Zimmer Holdings (ZMH), a global orthopedic and surgical products company, has acquired Memphis-based medical device company ExtraOrtho. ExtraOrtho with its external fixation line, XtraFix External Fixation System, is expected to broaden Zimmer's existing portfolio of trauma-care solutions and also bolster the company's position in the external fixation market, which is estimated to be $820 million. However, financial terms of the deal have not been disclosed.
On the heels of a series of newly launched technologies, Zimmer has emerged as one of the fastest growing companies in the $5.5 billion global trauma market. During the third quarter of 2011, Zimmer recorded double-digit sales growth in its trauma business across all geographies, particularly in Europe, Middle East and Africa, where the growth rate was 21.4% (at CER).
Over the past few quarters, the company has been witnessing expansion in the NCB Periprosthetic Plating system, which primarily addresses complex femoral fractures that can occur around the knee or a hip implant. Furthermore, the Natural Nail product family, particularly the Cephalomedullary Nail, continues to be the growth driver for this segment.
The company has embarked on its growth trajectory with new product launches, implementation of new technologies and expansion into the emerging markets. Additionally, we believe the company’s strong cash generation, with $553 million in cash and cash equivalents and debt as a percentage of total capital at 21.6% in the last reported quarter, facilitates meaningful investment and acquisitions.
However, Zimmer continues to witness challenges in the form of pricing pressure and lower procedure volumes resulting from economic uncertainty. Moreover, the company faces tough competition from players such as Smith & Nephew (SNN), Stryker Corporation (SYK) among others.
We have a Neutral recommendation on Zimmer, in line with its peers. All the stocks mentioned above retain short-term Zacks #3 Ranks (Hold).
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ZIMMER HOLDINGS (ZMH): Free Stock Analysis Report
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