Zimmer Biomet (ZBH) Q3 Earnings Top Estimates, View Slashed
Zimmer Biomet Holdings, Inc. ZBH posted third-quarter 2021 adjusted earnings per share (EPS) of $1.81, beating the Zacks Consensus Estimate by 3.4%. The figure remained unchanged year over year.
The quarter’s adjustments include certain amortization, restructuring, quality remediation, acquisition, integration, and related costs, among others.
On a reported basis, the company registered earnings of 69 cents per share down from $1.16 a year ago.
Revenue Details
Third-quarter net sales of $1.92 billion edged down 0.3% (down 0.8% at constant exchange rate or CER) year over year. The figure missed the Zacks Consensus Estimate by 1.6%. However, third-quarter net sales increased 1.7% from the third quarter of 2019 (pre-pandemic) level, up 0.4% at CER.
Segmental Details
During the third quarter, sales generated in the Americas totaled $1.18 billion (down 3.2% year over year at CER) while the same in EMEA (Europe, the Middle East and Africa) grossed $393.1 million (up 5.9% year over year at CER). Asia-Pacific registered a 0.5% rise at CER to $350.4 million.
Segments
Sales in the Knees unit dropped 0.7% year over year at CER to $647.9 million. Hips recorded a 6.6% decline at CER to $453.8 million. Revenues in the S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) unit increased 4.2% year over year to $437.6 million.
Among rest of the segments, Dental & Spine were down 6.1% at CER to $238.6 million. Other revenues rose 15.4% to $146.1 million.
Zimmer Biomet Holdings, Inc. Price, Consensus and EPS Surprise
Zimmer Biomet Holdings, Inc. price-consensus-eps-surprise-chart | Zimmer Biomet Holdings, Inc. Quote
CMFT (Craniomaxillofacial and Thoracic) products, previously reported in the Dental, Spine & CMFT category, are now included in the S.E.T. category. Meanwhile, the company is progressing with the planned spin-off procedure of the dental & spine arm.
Margins
Gross margin, after excluding intangible asset amortization, was 69.8%, reflecting a contraction of 71 basis points (bps) in the third quarter. Selling, general and administrative expenses were up 1.6% to $802.4 million. Research and development expenses rose 26.8% to $108.9 million. Adjusted operating margin contracted 268 bps to 22.4% during the quarter.
Cash Position
Zimmer Biomet exited the third quarter of 2021 with cash and cash equivalents of $919.6 million compared with $1.04 billion at second-quarter end. Long-term debt at the end of the reported quarter totaled $6.46 billion compared with $7.85 billion at the end of the sequentially-last quarter.
Cumulative net cash provided by operating activities at the end of the third quarter was $1.13 billion compared with $779.4 million in the year-ago period.
2021 Guidance
This time, on a dismal quarterly performance, the company slashed its financial guidance for 2021.
Reported revenue growth is expected in the range of 11.3% to 12.5% (from the earlier expectation of 14.5% to 16.5%) compared with the last year.
Adjusted EPS for the full year is expected in the range of $7.32 to $7.47 ($7.65 to $7.95).
The Zacks Consensus Estimate for 2021 adjusted earnings is pegged at $7.72 on revenues of $8.07 billion.
Our Take
Zimmer Biomet ended the third quarter with better-than-expected earnings but missed on the revenue front. The year-over-year decline in reported and constant currency revenues was concerning. Sales were soft in the Americas whereas EMEA and Asia-Pacific registered growth at CER. In terms of operating segments, apart from the S.E.T. and Others segments, the rest of the company’s core divisions, Knees, Hips, and Dental & Spine, registered significant year-over-year declines in revenues at CER. In the quarter, Zimmer Biomet continued to face COVID-induced challenges and market pressure.
Significant margin contractions and a slashed 2021 guidance are concerns too.
Zacks Rank and Key Picks
Zimmer Biomet currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Thermo Fisher Scientific Inc. TMO, Omnicell, Inc. OMCL and West Pharmaceutical Services, Inc. WST.
Thermo Fisher, carrying a Zacks Rank #1 (Strong Buy), reported third-quarter 2021 adjusted EPS of $5.76, which beat the Zacks Consensus Estimate by 23.3%. Revenues of $9.33 billion outpaced the consensus mark by 12%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Omnicell reported third-quarter 2021 adjusted EPS of $1.08, surpassing the Zacks Consensus Estimate by 18.7%. Revenues of $296.5 million surpassed the Zacks Consensus Estimate by 4.4%. It currently carries a Zacks Rank #2 (Buy).
West Pharmaceutical reported third-quarter 2021 adjusted EPS of $2.06, which surpassed the Zacks Consensus Estimate by 13.2%. Revenues of $706.5 million outpaced the Zacks Consensus Estimate by 3.2%. It currently carries a Zacks Rank #2.
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