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Zimmer Biomet (ZBH) Hurt by China VBP, COVID-Led Staff Shortage
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Zimmer Biomet (ZBH - Free Report) is currently grappling with issues like macroeconomic uncertainties, pricing pressure and unfavorable currency fluctuations. COVID-related sales disruption is expected to persist. The stock has a Zacks Rank #4 (Sell).
In the past year, Zimmer Biomet has underperformed its industry. The stock has lost 20.1% compared with the 14.4% fall of the industry.
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 China’s government.
In terms of COVID-related hurdles, the company registered a business loss in Q4 due to hospital staffing shortages and the global spread of Omicron.
In the fourth quarter, Zimmer Biomet recognized severe customer staffing shortages and a more-than-anticipated impact of China VBP both of which resulted in dismal Q4 revenues. The company expects these issues to continue in 2022 as well. Accordingly, the company anticipates Q1 performance to likely be under more pressure than Q4. Given the prolonged impact that COVID-19 is having on Zimmer Biomet’s business, the company has removed its target of at least 30% adjusted operating margin exiting 2023.
Pricing continues to remain a major headwind for Zimmer Biomet. The company's top-line growth in the last-reported quarter was partially offset by continued pricing pressure, mostly in the Americas and Europe operating segments. We remain concerned about the pricing scenario as it will be affected by cost-containment efforts by governmental healthcare, local hospitals and health systems.
Zimmer Biomet expects to face an adverse pricing impact in the first half of 2022, which is being compared to a non-VBP first half of 2021. According to the company, the pressure is going to be more acute on the year-over-year comparison.
On a positive note, Zimmer Biomet, in spite of a difficult business scenario in the fourth quarter, was able to witness continued strong demand and momentum for the ROSA robotics line globally. In the entire year, the company actually more than doubled the number of installed ROSAs versus its cumulative total at the end of 2020. In a major milestone, in the fourth quarter, those installed ROSAs allowed Zimmer Biomet to reach 10% in total knee procedure penetration in the United States for the first time as a company. The team also delivered a successful limited launch of the world's first and only smart knee, the Persona iQ. So far, the customer feedback has been good.
Moreover, Zimmer Biomet’s latest spin-off of the non-core dental and spine business is expected to prove strategic for the core business.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 41.3% versus the 53.5% industry decline.
Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It currently has a Zacks Rank #2.
Henry Schein has outperformed the industry over the past year. HSIC has gained 27% compared with the industry’s 11% rise over the past year.
McKesson has a long-term earnings growth rate of 11.8%. McKesson’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It presently carries a Zacks Rank #2.
McKesson has outperformed the industry over the past year. MCK has gained 58.1% in the said period compared with 10.9% growth of the industry.
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Zimmer Biomet (ZBH) Hurt by China VBP, COVID-Led Staff Shortage
Zimmer Biomet (ZBH - Free Report) is currently grappling with issues like macroeconomic uncertainties, pricing pressure and unfavorable currency fluctuations. COVID-related sales disruption is expected to persist. The stock has a Zacks Rank #4 (Sell).
In the past year, Zimmer Biomet has underperformed its industry. The stock has lost 20.1% compared with the 14.4% fall of the industry.
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 China’s government.
In terms of COVID-related hurdles, the company registered a business loss in Q4 due to hospital staffing shortages and the global spread of Omicron.
In the fourth quarter, Zimmer Biomet recognized severe customer staffing shortages and a more-than-anticipated impact of China VBP both of which resulted in dismal Q4 revenues. The company expects these issues to continue in 2022 as well. Accordingly, the company anticipates Q1 performance to likely be under more pressure than Q4. Given the prolonged impact that COVID-19 is having on Zimmer Biomet’s business, the company has removed its target of at least 30% adjusted operating margin exiting 2023.
Zimmer Biomet Holdings, Inc. Price
Zimmer Biomet Holdings, Inc. price | Zimmer Biomet Holdings, Inc. Quote
Pricing continues to remain a major headwind for Zimmer Biomet. The company's top-line growth in the last-reported quarter was partially offset by continued pricing pressure, mostly in the Americas and Europe operating segments. We remain concerned about the pricing scenario as it will be affected by cost-containment efforts by governmental healthcare, local hospitals and health systems.
Zimmer Biomet expects to face an adverse pricing impact in the first half of 2022, which is being compared to a non-VBP first half of 2021. According to the company, the pressure is going to be more acute on the year-over-year comparison.
On a positive note, Zimmer Biomet, in spite of a difficult business scenario in the fourth quarter, was able to witness continued strong demand and momentum for the ROSA robotics line globally. In the entire year, the company actually more than doubled the number of installed ROSAs versus its cumulative total at the end of 2020. In a major milestone, in the fourth quarter, those installed ROSAs allowed Zimmer Biomet to reach 10% in total knee procedure penetration in the United States for the first time as a company. The team also delivered a successful limited launch of the world's first and only smart knee, the Persona iQ. So far, the customer feedback has been good.
Moreover, Zimmer Biomet’s latest spin-off of the non-core dental and spine business is expected to prove strategic for the core business.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 41.3% versus the 53.5% industry decline.
Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It currently has a Zacks Rank #2.
Henry Schein has outperformed the industry over the past year. HSIC has gained 27% compared with the industry’s 11% rise over the past year.
McKesson has a long-term earnings growth rate of 11.8%. McKesson’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It presently carries a Zacks Rank #2.
McKesson has outperformed the industry over the past year. MCK has gained 58.1% in the said period compared with 10.9% growth of the industry.