What's in Store for Zimmer Biomet (ZBH) in Q4 Earnings?
Zimmer Biomet Holdings, Inc. ZBH is scheduled to report fourth-quarter and full-year 2023 results on Feb 8, before market open.
In the last reported quarter, the company’s earnings of $1.65 exceeded the Zacks Consensus Estimate by 3.8%. Over the trailing four quarters, its earnings outperformed the consensus estimate on three occasions and matched the same once, the average beat being 5.09%.
Let’s take a look at how things have shaped up prior to this announcement.
Factors at Play
Like its industry competitors, Zimmer Biomet’s 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 margin deceleration. However, the company also assumes these headwinds to ease out, banking on its strong pipeline and the solid execution of its growth strategies. This is likely to be reflected in the fourth-quarter top-line results of the company.
However, the implementation of the volume-based procurement program brought down China’s orthopedic device prices, which might have adversely impacted ZBH’s business in this region in the to-be-reported quarter.
Overall, Zimmer Biomet is expected to have witnessed procedure recovery in its legacy business in the fourth quarter. Strong strategic execution and innovations are expected to have driven fourth-quarter revenues from the Knees and Hip businesses.
Zimmer Biomet Holdings, Inc. Price and EPS Surprise
Zimmer Biomet Holdings, Inc. price-eps-surprise | Zimmer Biomet Holdings, Inc. Quote
The company is expected to have witnessed strong performance across Avenir Complete hip. This flagship product, along with the G7 Revision System, propels ZBH to a strong position within the direct anterior and revision submarkets of the hip. Moreover, 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 7.2% in the fourth quarter on a year-over-year basis.
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 uptake of Persona OsseoTi Keel Tibia for Cementless Knee Replacement. With ROSA, the company is expected to have witnessed strong gross adoption in the Ambulatory Surgical Centers settings. Further, the recent acquisitions of Embody and ReLign are expected to have contributed to Knees sales in the fourth quarter. However, industry-wide pressure related to GLP-1 drugs and the perceived impact on obesity is expected to have disrupted ZBH’s business.
Per our model, the Knees business is expected to grow 4.6% in the fourth quarter on a year-over-year basis.
The S.E.T. business (comprising Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma) is expected to have performed well across key focus areas of CMFT (craniomaxillofacial and thoracic), 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. Meanwhile, the business might have witnessed pressure from reimbursement headwinds within the Restorative Therapies. In addition, the company has been experiencing acute supply challenges within Sports and Trauma. These trends are expected to have disrupted the company’s S.E.T. revenues in the fourth quarter.
For this business, our model shows a year-over-year expected revenue growth of 4.3% in the fourth quarter.
Q4 Estimates
The Zacks Consensus Estimate for fourth-quarter 2023 revenues is pegged at $1.93 billion, suggesting a 5.7% rise from the year-ago reported figure.
The Zacks Consensus Estimate for the company’s fourth-quarter 2023 earnings per share of $2.15 indicates a 14.4% 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 not the case, as you can see below.
Earnings ESP: Zimmer Biomet has an Earnings ESP of 0.00%. 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.
Stocks to Consider
Here are a few medical stocks worth considering, as these have the right combination of elements to post an earnings beat this quarter.
Abbott Laboratories ABT has an Earnings ESP of +1.68% and a Zacks Rank #2. The company is scheduled to release its fourth-quarter 2023 results on Jan 24. You can see the complete list of today’s Zacks #1 Rank stocks here.
ABT has an earnings yield of 4.03% compared to the industry’s -0.62%. ABT surpassed earnings in each of the trailing four quarters, the average being 6.76%.
RxSight RXST has an Earnings ESP of +3.85% and a Zacks Rank #2. The company is expected to release fourth-quarter 2023 results soon.
RXST has an expected long-term earnings growth rate of 21%. The company surpassed earnings in each of the trailing four quarters, the average being 18.25%.
Sarepta Therapeutics SRPT currently has an Earnings ESP of +52.45% and a Zacks Rank #2. The company is expected to release its fourth-quarter 2023 results shortly.
SRPT has an expected earnings growth rate of 132.6% compared with the industry’s 11.1%. In the last reported quarter, the company delivered an earnings surprise of 72.3%.
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