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Zimmer Biomet (ZBH) Q2 Earnings Top Estimates, Margins Expand

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Zimmer Biomet Holdings, Inc. (ZBH - Free Report) posted second-quarter 2021 adjusted earnings per share (EPS) of $1.90, beating the Zacks Consensus Estimate by 3.3%. The figure denoted a significant improvement from the year-ago adjusted number of 5 cents.

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

On a reported basis, the company registered earnings of 67 cents per share against loss of $1.00 a year ago.

Revenue Details

Second-quarter net sales of $2.03 billion were up 65.3% (up 60.7% at constant exchange rate or CER) year over year. The figure exceeded the Zacks Consensus Estimate by 2.3%. Second-quarter net sales increased 1.9% from the second quarter of 2019 (pre-pandemic) level, flat at CER.

Segmental Details

During the second quarter, sales generated in the Americas totaled $1.24 billion (up 68.3% year over year at CER) while the same in EMEA (Europe, the Middle East and Africa) grossed $429.8 million (up 80.5% year over year at CER). Asia-Pacific registered 24.4% rise at CER to $357.5 million.


Sales in the Knees unit improved 72.2% year over year at CER to $665.6 million. Hips recorded a 39.9% improvement at CER to $476.6 million. Revenues in the S.E.T. (Sports Medicine, Extremities and Trauma) unit increased 53% year over year to $462.1 million.

Among other segments, Dental & Spine rose 69.4% at CER to $263.5 million. Other revenues surged 105.9% to $161.1 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.


Gross margin, after excluding intangible asset amortization, was 71.3%, reflecting expansion of 593 basis points (bps) in the second quarter. Selling, general and administrative expenses were up 22.9% to $817.4 million. Research and development expenses rose 105.8% to $180.5 million. Adjusted operating margin expanded 1808 bps to 22.1% during the quarter.

Cash Position

Zimmer Biomet exited the second quarter of 2021 with cash and cash equivalents of $1.04 billion compared with $802.1 million at first-quarter end. Long-term debt at the end of the reported quarter totaled $7.85 billion compared with $7.54 billion at the end of the sequentially-last quarter.

Cumulative net cash provided by operating activities at the end of the second quarter was $700.4 million compared with $398.1 million in the year-ago period.

2021 Guidance

This time, the company narrowed its financial guidance for 2021.

Reported revenue growth is expected in the range of 14.5% to 16.5% (from the earlier expectation of 14% to 17%) compared with the last year.

Adjusted EPS for the full year is expected in the range of $7.65 to $7.95 ($7.60 to $8.00).

The Zacks Consensus Estimate for 2021 adjusted earnings is pegged at $7.83 on revenues of $8.10 billion.

Our Take

Zimmer Biomet ended the second quarter with better-than-expected revenues and earnings. Year-over-year earnings and constant currency revenue growth were extremely robust. Sales improved across all its operating segments and geographies as recovery from the pandemic continued through the months of the second quarter. Despite some ongoing COVID-19 pressure, the company expects continued improvement in procedure volume recovery through the second half of 2021. Strong margin expansion was another upside.

Related to its non-core dental and spine business spin off, the company earlier noted that this divestment will form a new and independent, publicly traded company (NewCo).  According to Zimmer Biomet, this is part of the company’s third phase of ongoing transformation, which includes changing the complexion of the business through active portfolio management in order to accelerate growth and drive value creation.  

Zacks Rank and Key Picks

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

Some better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Chemed Corporation (CHE - Free Report) .

Encompass Health, carrying a Zacks Rank #1 (Strong Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical, a Zacks #1 ranked stock, reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

Chemed reported second-quarter 2021 adjusted EPS of $4.60, surpassing the Zacks Consensus Estimate by 3.4%. Revenues of $532.3 million surpassed the Zacks Consensus Estimate by 0.8%. Chemed carries a Zacks Rank #2 (Buy).

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