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Zimmer Biomet (ZBH) Q3 Earnings Top Estimates, View Slashed

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·5 min read
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  • ZBH
  • TMO
  • WST
  • OMCL

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 and EPS Surprise
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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