Zimmer Biomet Holdings, Inc. (ZBH Quick QuoteZBH - Free Report) posted fourth-quarter 2021 adjusted earnings per share (EPS) of $1.95, a penny short of the Zacks Consensus Estimate. The adjusted figure also dropped 7.6% year over year.

The quarter’s adjustments include certain amortization, restructuring, litigation, and loss on early extinguishment of debt-related costs, among others.

On a reported basis, the company registered a loss of 40 cents per share, a significant plunge from earnings of $1.59 a year ago.

Full-year adjusted EPS was $7.37, a 29.9% improvement over 2020. However, this too lagged the Zacks Consensus Estimate by a penny. This compares with the company’s earlier-provided adjusted EPS guidance range for the full year of $7.32 to $7.47.

Revenue Details

Fourth-quarter net sales of $2.04 billion declined 2.3% (down 0.8% at constant exchange rate or CER) year over year. The figure missed the Zacks Consensus Estimate by 0.6%.

For 2021, net sales were $7.84 billion, an increase of 11.6% over 2020 (up 10.3% at CER). The full-year figure missed the Zacks Consensus Estimate by 0.2%. The company’s expectation of 2021 reported revenue growth was in the range of 11.3% to 12.5%.

Segmental Details

During the fourth quarter, sales generated in the Americas totaled $1.27 billion (down 1.5% year over year at CER) while the same in EMEA (Europe, the Middle East and Africa) grossed $464 million (up 17.3% year over year at CER). Asia-Pacific registered a 17.5% plunge at CER to $308.8 million.

Segments

Sales in the Knees unit edged up 0.4% year over year at CER to $720.1 million. Hips recorded a 2.8% decline at CER to $480.7 million. Revenues in the S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) unit fell 4.3% year over year to $410.5 million.

Among the rest of the segments, Dental & Spine was down 3% at CER to $260.7 million. Other revenues rose 14.1% to $165.9 million.

CMFT (Craniomaxillofacial and Thoracic) products, previously reported in the Dental, Spine & CMFT category, are now included in the S.E.T. category. Meanwhile, the company is progressing with the planned spin-off procedure of the dental & spine arm.The transaction is expected to close on Mar 1, 2022.

Margins

Gross margin, after excluding intangible asset amortization, was 67.5%, reflecting a contraction of 142 basis points (bps) in the fourth quarter. Selling, general and administrative expenses were up 4.5% to $934 million. Research and development expenses rose 13.4% to $113.4 million. Adjusted operating margin contracted 515 bps to 16.1% during the quarter.

Cash Position

Zimmer Biomet exited 2021 with cash and cash equivalents of $478.5 million compared with $802.1 million at 2020 end. Long-term debt at the end of the year totaled $5.46 billion compared with $7.63 billion at the end of the year-ago period.

Cumulative net cash provided by operating activities at the end of 2021 was $1.49 billion compared with $1.20 billion in the year-ago period.

2022 Guidance

Zimmer Biomet provided its financial guidance for 2022.

Revenues are expected to be flat to down 4% compared with 2021.

Adjusted EPS for the full year is expected in the range of $6.40-$6.80.

The Zacks Consensus Estimate for 2022 adjusted earnings is pegged at $7.99 on revenues of $8.17 billion (indicating 4% growth over 2021), both ahead of the company’s projection.

Our Take

Zimmer Biomet ended the year 2021 on a dismal note with fourth-quarter and full-year top-and-bottom-line numbers, missing the Zacks Consensus Estimate. According to the company, both net sales and earnings metrics were negatively impacted in the fourth quarter by China volume-based procurement (VBP) in Knees, Hips and S.E.T. product categories due to a combination of variables in advance of VBP implementation. Zimmer Biomet had earlier anticipated this negative impact in the Knees and Hips segments but it was not anticipated in the S.E.T. product category. In S.E.T., the nationalization of the provincial Trauma products tender was announced on Jan 24, 2022 by the Chinese government.

In terms of COVID-related hurdles, the company registered business loss in Q4 due to hospital staffing shortages and the global spread of Omicron.

Related to the ongoing spin-off of Zimmer Biomet’s dental and spine business, the new company ZimVie’s leadership team will host a virtual Investor Day later today. In a separate press release, Zimmer Biomet announced that its board of directors declared a pro-rata dividend of 80.3% of the outstanding common stock of ZimVie Inc. to Zimmer Biomet shareholders of record as of the close of business on Feb 15, 2022.

Zacks Rank and Key Picks

Zimmer Biomet currently carries a Zacks Rank #4 (Sell).

Here are a few stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) has an Earnings ESP of +10.29% and a Zacks Rank of #1 (Strong Buy). AMN Healthcare is slated to release fourth-quarter and full-year 2021 results on Feb 17. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 6.5% compares favorably with the industry’s 0.9%.

Allscripts Healthcare Solutions, Inc. (MDRX Quick QuoteMDRX - Free Report) has an Earnings ESP of +10.11% and a Zacks Rank of #2 (Buy). Allscripts will release fourth quarter and full-year 2021 results on Feb 24.

Allscripts’ long-term earnings growth rate is estimated at 11.1%. MDRX’s earnings yield of 5% compares favorably with the industry’s (4.9%).

Henry Schein, Inc. (HSIC Quick QuoteHSIC - Free Report) has an Earnings ESP of +1.94% and a Zacks Rank of 2. The company will report fourth-quarter and full-year 2021 results on Feb 15.

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 6.2% compares favorably with the industry’s 4.3%.