Zimmer Biomet (ZBH) Q2 Earnings Match Estimates, View Raised
Zimmer Biomet Holdings, Inc. ZBH posted second-quarter 2023 adjusted earnings per share (EPS) of $1.81, in line with the Zacks Consensus Estimate. The adjusted figure remained unchanged 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 $1.00 per share, marking a 36.9% improvement from the year-ago earnings.
Revenue Details
Second-quarter net sales of $1.87 billion increased 4.9% (up 6% at constant exchange rate or CER) year over year. The figure beat the Zacks Consensus Estimate by 2.1%.
Geographic Details
During the second quarter, sales generated in the United States totaled $1.07 billion (up 5% year over year), while the same in International grossed $800.7 million (up 7.2% year over year at CER).
Our model projected 1.2% revenue growth for the United States and 3.5% CER growth for the International arm of Zimmer Biomet for the second 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 10.5% year over year at CER to $771.4 million. Our model estimate was pegged at $711.8 million.
Hips recorded a 4.9% rise in the second quarter at CER to $504.3 million. Our model estimate was $519.1 million for the same.
Revenues in the S.E.T. unit was down 0.3% year over year at CER to $442.7 million. Our model estimate was $430.3 million.
Other revenues increased 6.5% to $151.2 million at CER in the second quarter. Our model estimate was $144.1 million.
Margins
Adjusted gross margin, after excluding the impact of intangible asset amortization, was 71.9%, reflecting an expansion of 57 basis points (bps) in the second quarter. Selling, general and administrative expenses were up 4.4% to $725.8 million. Research and development expenses rose 18.8% to $118.1 million. Adjusted operating margin expanded 3 bps to 26.8% in the quarter.
Cash Position
Zimmer Biomet exited the second quarter of 2023 with cash and cash equivalents of $319.8 million compared with $330.2 million at the end of the first quarter.
Cumulative net cash provided by operating activities at the end of the second quarter was $655.6 million compared with $661.2 million in the year-ago period.
2023 Guidance
Zimmer Biomet raised its financial guidance for 2023.
Revenue growth is now expected to be in the band of 6.5%-7% compared with 2022 (an improvement from the earlier band of 5%-6%).
Adjusted EPS for the full year is expected in the range of $7.47-$7.57 ($7.40-$7.50 earlier).
The Zacks Consensus Estimate for 2023 adjusted earnings is pegged at $7.46 on revenues of $7.34 billion.
Our Take
Zimmer Biomet ended the second quarter of 2023 with in-line earnings and a revenue beat. Each of the company’s geographic segments recorded strong year-over-year sales growth at CER. Barring S.E.T., the company’s business segments too reported strong CER growth. Management noted continued procedure recovery, solid execution and increasing traction around innovations in the reported quarter. Even amid the challenging macroeconomic conditions, expansion in the company’s adjusted gross and operating margins is encouraging. The raised 2023 guidance is an indication of the strong growth momentum to continue through the year.
Zacks Rank and Other Key Picks
Zimmer Biomet currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, Elevance Health, Inc. ELV and Intuitive Surgical, Inc. ISRG.
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. 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 12.4%.
Elevance Health reported a second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 4.2%.
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