Zimmer Holdings Inc. (ZMH) is scheduled to report its fourth-quarter 2014 results before the opening bell on Jan 29.
Last quarter, the company had reported an impressive third-quarter 2014 with both the top and the bottom line beating the respective Zacks Consensus Estimate. It had delivered a positive earnings surprise of 3.85% in the quarter with a trailing four quarter earnings beat of 2.42%. Let’s see how things are shaping up for this announcement.
Factors at Play
Despite posting an impressive third quarter, Zimmer had narrowed its outlook for full-year 2014. The company had revised its 2014 revenue guidance to 2.25% at CER as compared to the earlier range of 2.0% to 3.0%. The currency movement is expected to lower revenues by 0.75%, which in turn would lead to 1.5% revenue growth on a reported basis (1.5% to 2.5% expected earlier). The current Zacks Consensus Estimate for revenues remains at $4.69 billion.
Zimmer had also narrowed its 2014 adjusted earnings guidance to $6.05 from the earlier range of $6.00 to $6.10. The current Zacks Consensus Estimate of $6.05 is on par with the guidance.
Lowering of the full-year guidance indicates that the company is expecting a tepid fourth quarter.
Furthermore, Zimmer has been witnessing a downward trend in earnings estimate revisions over the past one month. For 2014, two estimates moved down over the past 30 days, with no upward revision. Likewise, for 2015, five estimates moved down, with no positive revisions over the same timeframe.
Earnings Whispers
Our proven model does not conclusively show that Zimmer is likely to beat earnings this quarter. This 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 -0.59% since the Most Accurate estimate stands at $1.69, while the Zacks Consensus Estimate is pegged higher at $1.70.
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.
Stocks to Consider
Here are three companies you may want to consider instead as our model shows they have the right combination of elements to post an earnings beat this quarter:
CR Bard Inc. (BCR), earnings ESP of +0.45% and a Zacks Rank #3 (Hold). CR Bard will report its fourth quarter 2014 earnings on Jan 29.
Humana Inc. (HUM) has an earnings ESP of +0.86% and a Zacks Rank #2 (Buy). Humana is expected to report its fourth-quarter and 2014 earnings on Feb 4.
HEALTHSOUTH Corp. (HLS) has an earnings ESP of +3.92% and a Zacks Rank #1 (Strong Buy). HEALTHSOUTH is scheduled to report its fourth-quarter and 2014 earnings on Feb 24.
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