Monday, October 26, 2009

Symmetry Medical illustrates the "elective" nature of elective surgery (SMA)

Aging baby-boomers, until now flush with cash, are expecting to not only live longer, but expect to live longer relatively pain free. Thus goes the logic behind owning shares like those of Symmetry Medical Inc (SMA), a maker of hip and knee orthopedic products, to name a few.

This morning the company guided 2009 earnings down to about 65cents per share, below previous guidance of about 81cents.

Brian Moore, President and Chief Executive Officer of Symmetry Medical, stated, "In anticipation of a softer overall orthopaedic market in the second half of 2009, we had previously guided for a decrease in revenue and proactively implemented cost adjustments to maintain our earnings goals. Since our previous guidance announcement, and particularly in recent weeks, we have experienced greater than anticipated order reductions. We believe this change in order flow will result in a significant shortfall to our revenue and earnings per share, primarily in the fourth quarter."

Mr. Moore continued, "Despite this recent volatility across all segments of the business, we are encouraged by gains in market share we have realized as our customers consolidate suppliers and focus on assuring product quality and supplier stability. Our customers' recent quarterly results highlight their inventory utilization. While this created negative implications for our business in the near term, it should bode well for Symmetry in the future. In addition, our customers have placed a much renewed emphasis on supply chain management and have engaged us in discussions on our contribution to this process. We see these expanding relationships resulting in a mid to long term positive impact on our business.

Well, that's the danger of having one client account for 41% of revenues, according to the last 10q filed by Symmetry. That customer might be Zimmer Holdings (ZMH), whose shares are near 52week highs, as their new leaner inventory strategy improves financial performance while hurting Symmetry's. Hopefully Symmetry is accurate in their view that this temporary shakeup among customer ordering patterns will benefit it in the long term - but the market is certainly skeptical, sending shares down 20% today.

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