A month has gone by since the last earnings report for Zimmer Biomet (ZBH Quick QuoteZBH - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Zimmer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Zimmer Biomet Q4 Sales Down Y/Y

Zimmer Biomet posted fourth-quarter 2020 adjusted earnings per share (EPS) of $2.11, beating the Zacks Consensus Estimate by 2.4%. The figure declined 8.3% year over year.

The quarter’s adjustments include certain amortization, restructuring, quality remediation, acquisition, integration and related costs among others.

On a reported basis, the company registered earnings of $1.59 per share, a 3.2% rise from the year-ago period.

Full-year adjusted earnings were $5.67, a 27.9% decline from the year-ago period. However, the figure exceeded the Zacks Consensus Estimate by 0.7%.

Revenue Details

Fourth-quarter net sales of $2.09 billion were down 1.9% (down 3.7% at constant exchange rate or CER) year over year. The figure exceeded the Zacks Consensus Estimate by 0.6%.

Full-year net sales were $7.03 billion, down 12% (down 12.4% at CER) from 2019. This too came in marginally ahead of the Zacks Consensus Estimate of $7.01 billion.

Segmental Details

During the fourth quarter, sales generated in the Americas totaled $1.28 billion (down 0.3% year over year at CER) while the same in EMEA (Europe, the Middle East and Africa) grossed $408.3 million (down 17.5% year over year at CER). Asia-Pacific registered 2% rise at CER to $393.1 million.

Segments

Sales in the Knees unit declined 4.8% year over year at CER to $737.1 million. Hips recorded a 3.4% decline at CER to $504.1 million. Revenues in the S.E.T. (Sports Medicine, Extremities and Trauma) unit increased 3.3% year over year to $375.9 million.

Among other segments, Dental, Spine & CMFT (Craniomaxillofacial and Thoracic) rose 0.8% at CER to $3145 million. Other revenues were down 9.3% to $154.2 million.

Margins

Gross margin, after excluding intangible asset amortization, came in at 68.9%, reflecting a contraction of 365 basis points (bps) in the fourth quarter. Selling, general and administrative expenses were up 1.3% to $893.9 million. Research and development expenses declined 17.4% to $100 million. Adjusted operating margin contracted 412 bps to 21.3% during the quarter.

Cash Position

Zimmer Biomet exited 2020 with cash and cash equivalents of $802.1 million compared with $617.9 million at 2019 end. Long-term debt at the end of 2020 totaled $7.63 billion compared with $6.72 billion at the end of 2019.

Cumulative net cash provided by operating activities at the end of the year was $1.20 billion compared with $1.59 billion in the year-ago period.

2021 Guidance

According to Zimmer Biomet, there continues to be uncertainty around the scope and duration of COVID-19 and its ongoing impact. Accordingly, it did not provide any guidance for 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -12.48% due to these changes.

VGM Scores

Currently, Zimmer has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Zimmer has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.