The Zacks Analyst Blog Highlights: Zimmer Holdings, Macy's, J. C. Penney Company, Wal-Mart Stores and Target

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Dec 16, 2011, 09:30 ET

CHICAGO, Dec. 16, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Zimmer Holdings (NYSE: ZMH), Macy's Inc. (NYSE: M), J. C. Penney Company Inc. (NYSE: JCP), Wal-Mart Stores Inc. (NYSE: WMT) and Target Corporation (NYSE: TGT).

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Here are highlights from Thursday's Analyst Blog:

New Zimmer Product for Hips

Leading orthopedic medical devices company, Zimmer Holdings (NYSE: ZMH) recently announced the launch of CLS Brevius Hip Stem with Kinectiv Technology in the US. Earlier in 2011, the company introduced CLS Brevius Stem in Europe and received positive clinical feedback.

The CLS Brevius Stem originates from CLS Spotorno Stem of Zimmer.CLS Brevius Stem with Kinectiv Technology is shorter than conventional stems, providing greater bone conservation compared to the original CLS Spotorno Stem. Zimmer strongly expects the integration of Kinectiv Technology in CLS Brevius Hip Stem to enhance the product further by providing intraoperative flexibility to restore patients' anatomies.

Zimmer offers a broad line of reconstructive implant and trauma products, as well as orthopedic surgical instruments and supplies. We believe that the company is treading the growth path with new product launches, employment of new technologies and expansion into emerging markets.

During the third quarter of fiscal 2011, the company's largest segment, Reconstructive Implant, recorded a 6% increase in revenue driven by growth in Asia-Pacific and Europe, partially offset by a decline in the Americas.

Revenues derived from Knees, Hips and Extremities grew 3%, 10% and 7%, respectively, on a year-over-year basis. Several products introduced over the past few quarters have gained significant traction in the international markets, leading to superior growth.

Hips business during the quarter witnessed positive volume/mix of 5.5%, partially offset by pricing pressure of 1.6%. The growth in this segment was mainly on the back of overall robust performance across the international market – Europe (up 18%) and Asia-Pacific (up 23%). However, sales from the US remained flat year over year.

India to Push Reform with Retail FDI

India's Prime Minister Manmohan Singh has refused to relent on allowing foreign direct investment (FDI) in retail in an interview to Bloomberg. Although the political opposition to reforming the sector is fierce and refuses to die down, Singh's government will push its agenda ahead.

The retail sector in India is largely unorganized -- a predominant preserve of small shopkeepers and 'corner' shops. The sector suffers from dis-economies of scale and over-intermediation, operates on thin margins, masks seasonal unemployment and is plagued by distribution and logistical inefficiencies.

According to the industry body Associated Chambers of Commerce and Industry of India, organized retail accounts for only 5%-8% (approximately $28 billion) of the country's total retail market (estimated at $450 billion) despite the presence of several domestic supermarket chains.

The government will have to hard-sell its agenda for retail reform to all stakeholders, including farmers, traders, shopkeepers, organized retail and big businesses keen to enter the sector. They need to be convinced of the benefits of the reform to dilute the political resistance.

As the retail infrastructure, such as, warehousing and supply chain management improves; food inflation, which has been a bane for over a year, would subside. FDI will also help from a fiscal perspective and shore up the sagging rupee, which has depreciated by around 17% this year besides improving the balance of payments situation.

Large retailers such as Macy's Inc. (NYSE: M), J. C. Penney Company Inc. (NYSE: JCP), Carrefour S. A. headquartered in France and Tesco plc of the United Kingdom -- the third largest retailer in the world in terms of revenues after Wal-Mart Stores Inc. (NYSE: WMT) and Carrefour -- already source merchandise from India.

The country needs investment dollars as much as retailers like Wal-Mart, Target Corporation (NYSE: TGT) and J. C. Penney want to sell in this large market, which is defined by favorable demographics.

With growing affluence, India is going through strong socio-economic-cultural changes. Despite a large population of 1.2 billion (2011 census), India has a burgeoning middle-class, which is increasingly becoming prosperous. The growing youthful population (65% below the age of 35 years), is becoming increasingly aspirational in its tastes and consumption preferences.

The country is also witnessing strong urbanization trends. An Asia Development Bank study projects that the urban population in India would rise to 550 million by 2030 or 42.0% of the total population from 28% in 2000. The Indian market is possibly the last remaining frontier in terms of size and range that the international retailers are eying with eagerness.

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