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Will Zimmer Biomet (ZBH) Beat Estimates This Earnings Season?

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Zimmer Biomet Holdings, Inc. (ZBH - Free Report) is scheduled to report third-quarter 2023 results on Nov 7, before market open.

In the last reported quarter, the company’s earnings of $1.82 met the Zacks Consensus Estimate. Over the trailing four quarters, its earnings outperformed the consensus estimate on three occasions and met on one occasion, the average beat being 4.47%. Let’s take a look at how things have shaped up prior to this announcement.

Factors at Play

Like its industry competitors, Zimmer Biomet business too is currently entangled in several headwinds, including supply challenges, inflationary pressure, a tough labor market and the current geopolitical landscape. All these have been leading to significant revenue disruption. However, the company also assumes these headwinds to ease out, banking on ZBH’s strong pipeline and solid execution of its growth strategies. This is likely to be reflected in the third-quarter top-line results of the company. Yet, rising labor and raw material costs and FX headwinds might have impacted ZBH’s bottom line in the third 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 in the to-be-reported quarter.

Overall, Zimmer Biomet is expected to have particularly witnessed procedure recovery in its legacy business in the third quarter. Strong strategic execution and a solid momentum with innovations are expected to have driven third-quarter revenues within the Knee and Hip businesses.

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

The company is expected to have witnessed strong performance acrossAvenir Complete hip. This flagship product along with G7 Revision System propels ZBH to a strong position within the direct anterior and revision submarkets of hip. Further, we are also hopeful aboutthe Triple Taper Stem, which completes the company’s direct interior approach portfolio. Zimmer Biomet earlier noted that, this new portfolio, combined with G7, is the most versatile acetabular component available and hence, will be unmatched in the industry. All these along with the continued solid Rosa pull-through in the hip category, especially in the United States, should significantly contribute to the top line within the Hip category.

Going by our model, the Hip business of Zimmer Biomet is projected to grow 2.1% in the third quarter on a year-over-year basis.

Within Knees, apart from a strong recovery in elective procedures, easy comparisons outside the United States, strong knee procedure recovery across most regions, continued global traction in the Persona knee system and continued increase in Rosa procedure penetration and pull-through are expected to have contributed to the company’s Knees business. The company is expected to have also gained from the Persona OsseoTi Keel Tibia for Cementless Knee Replacement.

Per our model, the Knee business is expected to grow 7% in the third quarter on a year-over-year basis.

Meanwhile, in the second quarter, the S.E.T. business (comprising Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma) witnessed pressure from reimbursement headwinds within the Restorative Therapies business. In addition, the company experienced more acute supply challenges within Sports and Trauma. These trends are still prevailing and once again are expected to have disrupted the company’s S.E.T. revenues in the third quarter. Yet, the company might report strong performance across key focus areas of CMFT, sports medicine and upper extremities. Zimmer Biomet is also likely to have gained from the launch of the Identity shoulder system in the United States.

For this business, our model shows a year-over-year expected revenue decline of 1.4% in the third quarter.

Q3 Estimates

The Zacks Consensus Estimate for third-quarter 2023 revenues is pegged at $1.74 billion, suggesting a 4.4% rise from the year-ago reported figure.

The Zacks Consensus Estimate for the company’s third-quarter 2023 earnings per share of $1.59 indicates a 0.6% rise from the year-ago adjusted earnings.

What Our Model Suggests

Per our proven model, a stock with a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a higher chance of beating estimates. This is exactly the case, as you can see below.

Earnings ESP: Zimmer Biomet has an Earnings ESP of +0.56%. 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 #2.

Other Stocks to Consider

Here are some other medical stocks worth considering, as these have the right combination of elements to post an earnings beat this quarter.

Insulet (PODD - Free Report) has an Earnings ESP of +6.61% and a Zacks Rank #2. The company will release third-quarter 2023 results on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Insulet has a long-term expected earnings growth rate of 35.7%. PODD has an earnings yield of 1.13% against the industry’s -2.58%.

Acadia Pharmaceuticals (ACAD - Free Report) has an Earnings ESP of +6.76% and a Zacks Rank #2. The company is scheduled to release third-quarter 2023 results on Nov 2.

ACAD has an expected long-term earnings growth rate of 43.4%. In the trailing four quarters, the company delivered an average earnings surprise of 20.33%.

Spero Therapeutics (SPRO - Free Report) currently has an Earnings ESP of +60.00% and a Zacks Rank #2. The company is expected to release third-quarter 2023 results shortly.

SPRO’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 72.4%. The Zacks Consensus Estimate for Spero Therapeutics’ fiscal 2023 third-quarter loss per share indicates an improvement of 54.6% from the year-ago reported figure.

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

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