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Zimmer Biomet (ZBH) to Report Q4 Earnings: What's in Store?

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Zimmer Biomet Holdings, Inc. (ZBH - Free Report) is expected to report fourth-quarter 2021 results on Feb 7, before market open.

In the last reported quarter, the company’s earnings of $1.81 beat the Zacks Consensus Estimate by 3.43%. Over the trailing four quarters, its earnings outperformed the consensus estimate on all occasions, the average beat being 5.59%.

Let’s take a look at how things have shaped up prior to this announcement.

Factors at Play

Zimmer Biomet witnessed a strong recovery of its legacy business in the first half of 2021, primarily driven by an expanded vaccination drive and the gradual opening up of the economy that led people to once again opt for non-COVID elective orthopedic and musculoskeletal procedures. However, the company struggled to maintain the recovery trend in the second half. The company’s Q3 top-line results reflected severe-than-expected staffing shortages and non-COVID procedural deferrals following the emergence of the Delta variant of COVID-19. The trend is likely to have continued in the fourth quarter, following the spread of Omicron — a more contagious variant of the virus globally. Industry trend shows the medical staffing shortage issue to have aggravated through the fourth-quarter months.

Further, Zimmer Biomet, which has a broad business base in China, is expected to have come under pressure from the implementation of the volume-based procurement (VBP) program in China, bringing the prices of orthopedic devices down.

Meanwhile, priority areas like the S.E.T. business (comprising Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma) are expected to have put up a strong fourth-quarter performancefueled by ramped-up investment in R&D and commercial infrastructure. We expect this arm to deliver strong results on the back of the company’s focus on sports and extremities, especially upper extremities, trauma and CMFT (Craniomaxillofacial Trauma). Zimmer Biomet is likely to have gained from its increasing presence in the field of Ambulatory Surgery Centers. Also, strong surgeon registrations of the Signature One surgical planning system for shoulder procedures are likely to have driven growth in Q4.

Ahead of the planned spin-off of the company’s Dental and Spine business (new publicly-traded companyZimVie to host a virtual Investor Day on Feb 7), Zimmer Biomet had been witnessing growth deceleration in the recent quarters, mainly due to unfavorable pricing. In the last-reported quarter, while the dental part of this segment posted growth and continued to benefit from strong execution and market recovery, the spine business declined year over year due to increasing COVID-19 pressure throughout the quarter.This momentum is likely to have continued during the fourth quarter as well with the market situation remaining more or less unchanged.

We expect the company to have witnessed strength in its performances within its Hips and Knees product portfolio in the United States, which is better equipped for pandemic support compared to the non-U.S. markets of Zimmer Biomet. The nature of the business, which is non-elective, might have continued with year-over-year growth in Q4.

Despite the recent surge in cases following the emergence of the Omicron virus, the robust performance of Avenir Complete is likely to have continued during the fourth quarter as well, thus driving the Hip business. Also, strong demand for ROSA Knee, along with strong momentum for Persona Revision, is likely to have continued through the to-be-reported quarter. The company’s two recent regulatory developments, including FDA 510(k) clearance of the ROSA Hip System for robotically-assisted direct anterior total hip replacement and FDA De Novo classification grant to market the tibial extension for Persona IQ, the world's first and only smart knee for total knee replacement surgery, both in August should have contributed to the fourth-quarter top line.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter 2021 revenues is pegged at $2.06 billion, suggesting a 1.4% drop from the year-ago reported figure.

The Zacks Consensus Estimate for the company’s fourth-quarter 2021 earnings per share of $1.96 indicates a 7.1% decline from the year-ago adjusted earnings.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a higher chance of beating estimates. However, this is not the case here as you can see:

Earnings ESP: Zimmer Biomet has an Earnings ESP of -0.50%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are a few medical stocks that have the right combination of elements to beat on earnings this reporting cycle.

Cara Therapeutics (CARA - Free Report) has an Earnings ESP of +5.24% and a Zacks Rank of 1. Cara Therapeutics is slated to release fourth-quarter 2021 results on Feb 24.  

CARA’s earnings yield of 4.2% compares favorably with the industry’s 1.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +2.62% and a Zacks Rank of 2. Henry Schein is slated to release fourth-quarter 2021 results on Feb 15. 

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.

Guardant Health (GH - Free Report) has an Earnings ESP of +9.45% and is a Zacks #2 Ranked stock.

Guardant Health is slated to release fourth-quarter 2021 results on Feb 23. Guardant Health’s long-term earnings growth rate is estimated at 10.8%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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