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Zimmer Biomet (ZBH) to Report Q3 Earnings: What's in Store?

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Zimmer Biomet Holdings, Inc. (ZBH - Free Report) is scheduled to report third-quarter 2022 results on Nov 2, before market open.

In the last reported quarter, the company’s earnings of $1.82 exceeded the Zacks Consensus Estimate by 11.66%. Over the trailing four quarters, its earnings outperformed the consensus estimate on three occasions and missed once, the average beat being 7.4%. Let’s take a look at how things have shaped up prior to this announcement.

Factors at Play

Zimmer Biomet is expected to have witnessed a recovery in its legacy business in the third quarter, primarily driven by the continued opening up of the economy. Over the third-quarter months, it was observed that people kept opting for non-COVID elective orthopedic and musculoskeletal procedures.

However, the company might have faced upheaval in business, thanks to the global inflationary situation in terms of mounting labor and raw material costs, severe staffing shortages and supply issues, which might have impacted ZBH’s bottom line in the third quarter.

Further, Zimmer Biomet, which has a broad business base in China, is expected to have come under pressure due to the lingering COVID-led lockdowns and limited trade. Further, the implementation of the volume-based procurement program brought down China orthopedic device prices, which might have otherwise impacted ZBH’s business in this region.

On a positive note, 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 better third-quarter performance compared with 2021, fueled 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 Craniomaxillofacial and Thoracic. Zimmer Biomet is likely to have gained from the September launch of the Identity shoulder system in the United States. This might have partially contributed to the company’s Q3 revenues.

We expect the company to have witnessed strength in its performances within its Hips and Knees product portfolios in the United States. Apart from a strong recovery in elective procedures, easy comparisons outside the United States, along with strong knee procedure recovery across most regions, continued global traction for the Persona knee system, especially with Persona Revision in the United States, and ROSA penetration and pull-through are expected to have contributed to the company’s Hipsand Knees business.

The strong performance of Avenir Complete is likely to have continued during the third quarter, thus driving the Hip business. In this regard, the company earlier this year noted that one of the fastest-growing subcategories of hip is the direct anterior approach. Both the recently-launched Avenir Complete and ROSA applications target that fast-growth submarket.

Q3 Estimates

The Zacks Consensus Estimate for third-quarter 2022 revenues is pegged at $1.63 billion, suggesting a 15.2% drop from the year-ago reported figure.

The Zacks Consensus Estimate for the company’s third-quarter 2022 earnings per share of $1.56 indicates a 13.8% 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. This is not the case here as you can see:

Earnings ESP: Zimmer Biomet has an Earnings ESP of -0.59%. 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 #3.

We note that the third-quarter estimates are showing a sharp year-over-year decline. As the third-quarter projection itself has become conservative, there are higher chances that the company will beat estimates for this quarter.

Stocks Worth a Look

Chimerix (CMRX - Free Report) has an Earnings ESP of +33.81% and a Zacks Rank of #2. The company will release third-quarter 2022 results on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chimerix’s earnings yield of 112.3% compares favorably with the industry’s -2.98%.

McKesson (MCK - Free Report) has an Earnings ESP of +0.27% and a Zacks Rank of #2. McKesson is scheduled to release third-quarter 2022 results on Nov 1.

McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.77% compares favorably with the industry’s 5.19%.

Humana (HUM - Free Report) currently has an Earnings ESP of +1.12% and a Zacks Rank of #2. Humana is slated to release third-quarter 2022 results on Nov 2.

Humana’s long-term historical earnings growth rate is estimated at 16.2%. HUM’s earnings yield of 5% is in line with the industry.

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

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