The company's weak preliminary Q4 expectations of $0.65-$0.70 per share in earnings and sales of $202-$203 million was due to three key factors. Management stated the three key factors were poor inventory management of instruments at the distributor level, weaker-than-expected performance within the US Extremities franchise, and weakness internationally. Poor inventory management accounted for roughly 50 percent of the miss.
An analyst at Jefferies comments, "While visibility on the latter remains limited, the first two issues are likely transient in nature and the company looks for trends to normalize by 2Q12; importantly, the company does not believe incremental end market weakness contributed to the miss. Relative to the Plainsboro FDA warning letter, based on management commentary, we continue to view this issue as manageable."
The firm has cut its FY11 and FY12 EPS estimates from $2.88 and $3.33 to $2.78 and $3.00.