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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 scheduled to report fourth-quarter 2022 results on Feb 3, before market open.

In the last reported quarter, the company’s earnings of $1.58 exceeded the Zacks Consensus Estimate by 1.28%. Over the trailing four quarters, its earnings outperformed the consensus estimate on three occasions and missed once, the average beat being 6.86%. 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 continued recovery in its legacy business in the fourth quarter, despite the choppy market situation amid real macroeconomic challenges. This is expected to have been driven by strong elective procedure recovery and commercial execution within the Knee and Hip businesses.

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 fourth 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 through the months of the fourth quarter. Further, the implementation of the volume-based procurement program brought down China’s orthopedic device prices, which might have otherwise impacted ZBH’s business in this region.

We expect the company to have witnessed strength in its performances within its Hips and Knees product portfolio 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 Knees business.

The strong performance of the G7 Revision System and Avenir Complete is likely to have continued during the fourth quarter, thus driving the Hip business in Q4. Internationally, strong procedure recovery and easier comps outside the United States are expected to have driven the fourth-quarter Hip business.

However, priority areas like the S.E.T. business (comprising Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma) reported a decline in salesin Q3, impacted by a tough comparison with 2021. This might have been once again repeated in Q4. Yet, the company expects the pressure around the S.E.T. business to ease in Q4, thereby contributing to the top line. Zimmer Biomet is also likely to have gained from the September launch of the Identity shoulder system in the United States.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter 2022 revenues is pegged at $1.76 billion, suggesting a 13.8% decline from the year-ago reported figure.

The Zacks Consensus Estimate for the company’s fourth-quarter 2022 earnings per share of $1.83 indicates a 6.2% 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 -0.37%. 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 fourth-quarter estimates are showing a sharp year-over-year decline. As the fourth-quarter projection itself has become conservative, there are higher chances that the company will beat estimates for this quarter.

Stocks Worth a Look

Cardinal Health (CAH - Free Report) has an Earnings ESP of +5.75% and a Zacks Rank of #2. The company will release fourth-quarter 2022 results on Feb 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardinal Health has a long-term expected earnings growth rate of 11.7%. Cardinal Health’s earnings yield of 6.87% compares favorably with the industry’s 4.34%.

McKesson Corporation (MCK - Free Report) has an Earnings ESP of +0.84% and a Zacks Rank of #2. McKesson is scheduled to release third-quarter fiscal 2023 results on Feb 1.

MCK’s long-term historical earnings growth rate is estimated at 10.1%. MCK’s earnings yield of 6.49% compares favorably with the industry’s 4.34%.

Laboratory Corporation of America Holdings or LabCorp (LH - Free Report) currently has an Earnings ESP of +2.67% and a Zacks Rank of #2. LabCorp is scheduled to release fourth-quarter 2022 results on Feb 16.

LabCorp’s long-term historical earnings growth rate is estimated at 26.1%. LabCorp’s earnings yield of 7.02% compares favorably with the industry’s 4.34%.

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

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