It has been about a month since the last earnings report for Zimmer Biomet (
ZBH Quick Quote ZBH - Free Report) . Shares have lost about 8.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zimmer due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Zimmer Biomet Q1 Earnings Beat Estimates, View Up
Zimmer Biomet posted first-quarter 2023 adjusted earnings per share of $1.89, beating the Zacks Consensus Estimate by 13.9%. The adjusted figure improved 17.4% year over year.
The quarter’s adjustments included certain amortization, restructuring and European Union Medical Device Regulation-related charges, among others.
On a reported basis, the company registered earnings of $1.11 per share, a huge improvement from the year-ago earnings of 7 cents.
First-quarter net sales of $1.83 billion increased 10.1% (up 13.2% at constant exchange rate or CER) year over year. The figure beat the Zacks Consensus Estimate by 7.6%.
During the first quarter, sales generated in the United States totaled $1.06 billion (up 12.7% year over year at CER), while the same in International grossed $770.6 million (up 14% year over year at CER).
In terms of product categories, post the dental and spine arm sell-off, the company reports through the remaining four product categories.
Sales in the Knees unit improved 18.2% year over year at CER to $762.5 million. Hips recorded a 12.9% rise at CER to $492.8 million. Revenues in the S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) unit rose 6.4% year over year to $433.4 million.
Other revenues increased 11.1% to $142.3 million at CER.
Adjusted gross margin, after excluding intangible asset amortization, was 72.7%, reflecting an expansion of 271 basis points (bps) in the first quarter. Selling, general and administrative expenses were up 4.6% to $715.9 million. Research and development expenses rose 13.9% to $110.4 million. Adjusted operating margin expanded 456 bps to 27.5% in the quarter.
Zimmer Biomet exited the first quarter of 2023 with cash and cash equivalents of $330.2 million compared with $375.7 million at the end of 2022.
Cumulative net cash provided by operating activities at the end of the first quarter was $307.7 million compared with $315.7 million in the year-ago period.
Zimmer Biomet raised its financial guidance for 2023.
Revenue growth is now expected to be in the band of 5 compared with 2022 (a significant increase from the earlier band of 1.5%-3.5%).
Adjusted earnings per share for the full year is expected in the range of $7.40-$7.50 ($6.95-$7.15 earlier).
The Zacks Consensus Estimate for 2023 adjusted earnings is pegged at $7.04 on revenues of $7.13 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
Currently, Zimmer has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Zimmer has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.