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Zimmer Biomet (ZBH) Q2 Earnings Top Estimates, 2022 View Up

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Zimmer Biomet Holdings, Inc. (ZBH - Free Report) posted second-quarter 2022 adjusted earnings per share (EPS) of $1.82, beating the Zacks Consensus Estimate by 11.7%. The adjusted figure also rose a significant 20.5% year over year.

The quarter’s adjustments included certain amortization, restructuring and quality remediation-related charges, among others.

On a reported basis, the company registered earnings of 73 cents per share, a 7.4% rise from earnings a year ago.

Revenue Details

Second-quarter net sales of $1.78 billion increased 1% (up 6% at constant exchange rate or CER) year over year. The figure beat the Zacks Consensus Estimate by 3.5%.

Geographic Details

Zimmer Biomet updated its geographic sales reporting with two segments: United States and International. 

During the second quarter, sales generated in the United States totaled $1.02 billion (up 1.3% year over year at CER) while the same in International grossed $764 million (up 12.2% year over year at CER).

Segments

In terms of product categories, post the dental and spine arm sell-off, the company continues to report through the remaining four product categories.

Sales in the Knees unit improved 11.2% year over year at CER to $704.9 million. Hips recorded an 8.6% rise at CER to $487.2 million. Revenues in the S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) unit increased 0.1% year over year to $446.4 million.

 

Other revenues fell 6.1% to $143.3 million.

Earlier the company noted that its CMFT (Craniomaxillofacial and Thoracic) products, previously reported in the Dental, Spine & CMFT category, are now included in the S.E.T. category.

Margins

Gross margin, after excluding intangible asset amortization, was 71.3%, reflecting a contraction of 54 basis points (bps) in the second quarter. Selling, general and administrative expenses were down 0.2% to $695.2 million. Research and development expenses rose 39.8% to $99.4 million. Adjusted operating margin expanded 374 bps to 26.7% in the quarter.

Cash Position

Zimmer Biomet exited the second quarter of 2022 with cash and cash equivalents of $386.4 million compared with $435.8 million at the end of the first quarter of 2022.

Cumulative net cash provided by operating activities at the end of the second quarter was $661.2 million compared with $642.5 million in the year-ago period.

2022 Guidance

Zimmer Biomet updated its financial guidance for 2022.

Revenues are expected to be down 1% to up 1% (an improvement from the earlier band of down 1.5% to up 0.5%) compared with 2021.

Adjusted EPS for the full year is expected in the range of $6.70-$6.90 (a rise from the projection of $6.65-$6.85 earlier).

The Zacks Consensus Estimate for 2022 adjusted earnings is pegged at $6.80 on revenues of $6.69 billion.

Our Take

Zimmer Biomet ended the second quarter of 2022 with better-than-expected earnings and revenues. Each of the company’s geographic segments and product divisions barring “other” recorded year-over-year sales growth at CER. A raised 2022 guidance is indicative of this improving trend to continue for the rest of the year. However, a contraction in the company’s gross margins is concerning. A significant reduction in R&D expenses too increases concern about pipeline-related progress.

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 quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , Humana Inc. (HUM - Free Report) and Alkermes plc (ALKS - Free Report) .

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 7.1% compared with the industry’s 3.3%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

Humana, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $8.67, which beat the Zacks Consensus Estimate by 13%. Revenues of $23.7 billion outpaced the consensus mark by 1.2%.

Humana has an estimated long-term growth rate of 13.5%. HUM’s earnings surpassed estimates in all the trailing four quarters, the average being 9.1%.

Alkermes reported second-quarter 2022 adjusted EPS of 6 cents, which surpassed the Zacks Consensus Estimate by 50%. Second-quarter revenues of $276.2 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Alkermes has an estimated long-term growth rate of 24.9%. ALKS’s earnings surpassed estimates in all the trailing four quarters, the average being 325.5%.