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Zimmer Biomet (ZBH) Q3 Earnings Top Estimates, Margins Fall
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Zimmer Biomet Holdings, Inc. (ZBH - Free Report) posted third-quarter 2023 adjusted earnings per share (EPS) of $1.65, exceeding the Zacks Consensus Estimate by 3.8%. The adjusted figure improved 4.4% 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 77 cents per share, which reflected a 16.3% improvement from the year-ago earnings.
Revenue Details
Third-quarter net sales of $1.75 billion increased 5% (up 4.7% at constant exchange rate or CER) year over year. The figure beat the Zacks Consensus Estimate by 0.7%.
Geographic Details
During the third quarter, sales generated in the United States totaled $1.03 billion (up 6% year over year), while the same in International grossed $722.2 million (up 2.9% year over year at CER).
Our model projected 2% revenue growth for the United States and 6% growth at CER for the International arm for the third quarter.
Zimmer Biomet Holdings, Inc. Price, Consensus and EPS Surprise
In terms of product categories, post the dental and spine arm sell-off, the company reports through the remaining four product categories, which are Knees, Hips, S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) and Other.
Sales in the Knees unit improved 7.3% year over year at CER to $706.3 million. Our model estimate was pegged at $703.2 million.
Hips recorded a 6% decline in the third quarter at CER to $465.3 million. Our model estimate was $477.7 million for the same.
Revenues in the S.E.T. unit were up 2.8% year over year at CER to $423.2 million. Our model estimate was $403.7 million.
Other revenues increased 16.4% to $158.8 million at CER in the third quarter. Our model estimate was $153.8 million.
Margins
Adjusted gross margin, after excluding the impact of intangible asset amortization, was 70.4%, reflecting a contraction of 34 basis points (bps) in the third quarter. Selling, general and administrative expenses were up 3.1% to $674.9 million. Research and development expenses rose 14.9% to $116.9 million. Adjusted operating margin contracted 18 bps to 25.3% in the quarter.
Cash Position
Zimmer Biomet exited the third quarter of 2023 with cash and cash equivalents of $292.1 million compared with $319.8 million at the end of the second quarter.
Cumulative net cash provided by operating activities at the end of the third quarter was $993.2 million compared with $1.11 billion in the year-ago period.
2023 Guidance
Zimmer Biomet raised its financial guidance for 2023.
Reported revenue growth is expected to be in the band of 6%-6.5% compared with 2022 (earlier guidance was 6.5-7%). However, the company currently expects foreign exchange to have an adverse impact of 1% on revenues now (earlier expectation was an adverse impact of 0.5% on revenues).
Adjusted EPS for the full year is expected in the range of $7.47-$7.57 (unchanged).
The Zacks Consensus Estimate for 2023 adjusted earnings is pegged at $7.51 on revenues of $7.41 billion.
Our Take
Zimmer Biomet ended the third quarter of 2023 with earnings and revenue beat. Each of the company’s geographic segments recorded strong year-over-year sales growth on a reported basis as well as at CER. Barring Hips, the company’s business segments too reported strong CER growth. Management noted solid execution and increasing traction around innovations in the reported quarter. However, amid the challenging macroeconomic conditions, contraction in the company’s adjusted gross and operating margins raises concerns. The 2023 guidance is an indication of a severe FX headwind through the rest of the year.
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 Abbott Laboratories (ABT - Free Report) , Inari Medical (NARI - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
Abbott, carrying a Zacks Rank of 2 (Buy), reported adjusted EPS of $1.14 for third-quarter 2023, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.8%.
Inari Medical, carrying a Zacks Rank #2, reported adjusted EPS of 4 cents for third-quarter 2023, beating the Zacks Consensus Estimate by a staggering 128.6%. Revenues of $119 million outpaced the consensus estimate by 2.3%.
Inari Medical has an estimated earnings growth rate of 725% for the following year. Inari Medical’s earnings surpassed estimates in all the trailing four quarters, the average being 66.8%.
Integer Holdings reported third-quarter 2023 adjusted EPS of $1.27, beating the Zacks Consensus Estimate by 20.9%. Revenues of $404.7 million surpassed the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.
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Zimmer Biomet (ZBH) Q3 Earnings Top Estimates, Margins Fall
Zimmer Biomet Holdings, Inc. (ZBH - Free Report) posted third-quarter 2023 adjusted earnings per share (EPS) of $1.65, exceeding the Zacks Consensus Estimate by 3.8%. The adjusted figure improved 4.4% 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 77 cents per share, which reflected a 16.3% improvement from the year-ago earnings.
Revenue Details
Third-quarter net sales of $1.75 billion increased 5% (up 4.7% at constant exchange rate or CER) year over year. The figure beat the Zacks Consensus Estimate by 0.7%.
Geographic Details
During the third quarter, sales generated in the United States totaled $1.03 billion (up 6% year over year), while the same in International grossed $722.2 million (up 2.9% year over year at CER).
Our model projected 2% revenue growth for the United States and 6% growth at CER for the International arm for the third quarter.
Zimmer Biomet Holdings, Inc. Price, Consensus and EPS Surprise
Zimmer Biomet Holdings, Inc. price-consensus-eps-surprise-chart | Zimmer Biomet Holdings, Inc. Quote
Segments
In terms of product categories, post the dental and spine arm sell-off, the company reports through the remaining four product categories, which are Knees, Hips, S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) and Other.
Sales in the Knees unit improved 7.3% year over year at CER to $706.3 million. Our model estimate was pegged at $703.2 million.
Hips recorded a 6% decline in the third quarter at CER to $465.3 million. Our model estimate was $477.7 million for the same.
Revenues in the S.E.T. unit were up 2.8% year over year at CER to $423.2 million. Our model estimate was $403.7 million.
Other revenues increased 16.4% to $158.8 million at CER in the third quarter. Our model estimate was $153.8 million.
Margins
Adjusted gross margin, after excluding the impact of intangible asset amortization, was 70.4%, reflecting a contraction of 34 basis points (bps) in the third quarter. Selling, general and administrative expenses were up 3.1% to $674.9 million. Research and development expenses rose 14.9% to $116.9 million. Adjusted operating margin contracted 18 bps to 25.3% in the quarter.
Cash Position
Zimmer Biomet exited the third quarter of 2023 with cash and cash equivalents of $292.1 million compared with $319.8 million at the end of the second quarter.
Cumulative net cash provided by operating activities at the end of the third quarter was $993.2 million compared with $1.11 billion in the year-ago period.
2023 Guidance
Zimmer Biomet raised its financial guidance for 2023.
Reported revenue growth is expected to be in the band of 6%-6.5% compared with 2022 (earlier guidance was 6.5-7%). However, the company currently expects foreign exchange to have an adverse impact of 1% on revenues now (earlier expectation was an adverse impact of 0.5% on revenues).
Adjusted EPS for the full year is expected in the range of $7.47-$7.57 (unchanged).
The Zacks Consensus Estimate for 2023 adjusted earnings is pegged at $7.51 on revenues of $7.41 billion.
Our Take
Zimmer Biomet ended the third quarter of 2023 with earnings and revenue beat. Each of the company’s geographic segments recorded strong year-over-year sales growth on a reported basis as well as at CER. Barring Hips, the company’s business segments too reported strong CER growth. Management noted solid execution and increasing traction around innovations in the reported quarter. However, amid the challenging macroeconomic conditions, contraction in the company’s adjusted gross and operating margins raises concerns. The 2023 guidance is an indication of a severe FX headwind through the rest of the year.
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 Abbott Laboratories (ABT - Free Report) , Inari Medical (NARI - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
Abbott, carrying a Zacks Rank of 2 (Buy), reported adjusted EPS of $1.14 for third-quarter 2023, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.8%.
Inari Medical, carrying a Zacks Rank #2, reported adjusted EPS of 4 cents for third-quarter 2023, beating the Zacks Consensus Estimate by a staggering 128.6%. Revenues of $119 million outpaced the consensus estimate by 2.3%.
Inari Medical has an estimated earnings growth rate of 725% for the following year. Inari Medical’s earnings surpassed estimates in all the trailing four quarters, the average being 66.8%.
Integer Holdings reported third-quarter 2023 adjusted EPS of $1.27, beating the Zacks Consensus Estimate by 20.9%. Revenues of $404.7 million surpassed the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.