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Zimmer Biomet (ZBH) Beats on Q2 Earnings, Cuts Revenue View

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Zimmer Biomet Holdings, Inc. (ZBH - Free Report) posted second-quarter 2024 adjusted earnings per share (EPS) of $2.01, exceeding the Zacks Consensus Estimate by 1.5%. The adjusted figure increased 10.4% year over year.

The quarter’s adjustments included certain amortization, restructuring and other cost reduction initiatives and European Union Medical Device Regulation-related charges, among others.

On a reported basis, the company registered earnings of $1.18 per share, which reflected an 18% improvement from the year-ago figure.

Revenue Details

Second-quarter net sales of $1.94 billion increased 3.9% (up 5.6% at constant exchange rate or CER) year over year. The figure came in line with the Zacks Consensus Estimate.

Geographic Details

During the second quarter, sales generated in the United States totaled $1.11 billion (up 3.5% year over year), while International sales grossed $835.8 million (up 8.5% year over year at CER).

Our model projected 3.8% revenue growth for the United States and 4.2% growth at CER for the International arm in the second quarter.

Segments

The company currently reports through four product categories — Knees, Hips, S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) and Other.

Sales in the Knees unit improved 5.5% year over year at CER to $801.1 million. Our model estimate was pegged at $792.7 million.

Hips recorded 2.8% growth in the second quarter at CER to reach $506.5 million. Our model estimate was $516.9 million for the same.

Revenues in the S.E.T. unit were up 7.3% year over year at CER to $469.5 million. Our model estimate was $478 million.

Other revenues increased 11.3% to $164.9 million at CER in the second quarter. Our model estimate was $154.6 million.

 

Margins

Adjusted gross margin, after excluding the impact of intangible asset amortization, was 71.5%, reflecting a contraction of 40 basis points (bps) in the second quarter. Selling, general and administrative expenses rose 1.6% to $737.1 million. Research and development expenses declined 7.4% to $109.4 million. Adjusted operating margin expanded 115 bps to 27.9% in the quarter.

Cash Position

Zimmer Biomet exited the second quarter with cash and cash equivalents of $420.1 million compared with $393 million at the end of the first quarter.

Cumulative net cash provided by operating activities at the end of the second quarter was $597.4 million compared with $655.6 million in the year-ago period.

2024 Guidance

Zimmer Biomet updated its financial guidance for 2024.

Reported revenue growth is expected to be in the band of 4%-5% year over year (a decline from the earlier band of 4.5%-5.5%). The company currently expects foreign exchange to have an adverse impact of 1% (0.5% adverse impact projected earlier) on revenues.

Adjusted EPS expectation for the full year is unchanged in the range of $8.00-$8.15.

The Zacks Consensus Estimate for 2024 adjusted earnings per share is pegged at $8.10 on revenues of $7.75 billion.

Our Take

Zimmer Biomet ended the second quarter of 2024 with an earnings beat and in-line revenues. Each of the company’s geographic segments recorded strong year-over-year sales growth on a reported basis, as well as at CER. The company’s business segments, too, reported strong growth on a CER basis. The growth was driven by rising customer demand for the company’s suite of diversified products and solutions. Further, the strategic expansion of international business contributed to the top line. Amid challenging macroeconomic conditions, the company’s adjusted gross margin contracted. The decline in the 2024 revenue guidance raises concern.

Zimmer Biomet recently announced several acquisitions and alliances. The company signed a definitive agreement to acquire OrthoGrid Systems to expand its hip portfolio with an artificial intelligence-driven surgical guidance system for total hip replacement. ZBH also entered into a limited distribution agreement with THINK Surgical to offer TMINI a miniature handheld robotic system for total knee arthroplasty. It has also formalized a partnership with CBRE Group to develop and offer a comprehensive, turnkey solution needed to expand the orthopedic ASC footprint.

Zacks Rank and Key Picks

Zimmer Biomet currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Intuitive Surgical (ISRG - Free Report) , Abbott Laboratories, Inc. (ABT - Free Report) and Quest Diagnostics (DGX - Free Report) .

Intuitive Surgical reported second-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has a long-term earnings growth rate of 16.1% for 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.97%.

Abbott, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2024 earnings of $1.14 per share, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%.

ABT has an earnings growth rate of 10.1% for 2025 compared with the S&P 500’s 9.3%. The company beat on earnings in each of the trailing four quarters, the average surprise being 2.34%.

Quest Diagnostics, carrying a Zacks Rank #2 at present, reported second-quarter adjusted EPS of $2.35, which surpassed the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion outpaced the Zacks Consensus Estimate by 0.5%.

DGX has a historical five-year earnings growth rate of 7.4% compared with the industry’s 4.2%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.31%.

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