Zimmer Biomet (ZBH) Q1 Earnings Top Estimates, FY22 View Up

Zimmer Biomet Holdings, Inc. ZBH posted first-quarter 2022 adjusted earnings per share (EPS) of $1.61, beating the Zacks Consensus Estimate by 15%. The adjusted figure also rose 3.9% year over year.

The quarter’s adjustments included certain amortization, restructuring and litigation-related charges, among others.

On a reported basis, the company registered earnings of 35 cents per share, a significant plunge from earnings of 92 cents a year ago.

Revenue Details

First-quarter net sales of $1.66 billion increased 3.9% (up 6.8% at constant exchange rate or CER) year over year. The figure beat the Zacks Consensus Estimate by 3.8%.

Geographic Details

Under the latest structural reorganization following the spinoff of ZimVie, Zimmer updated its geographic sales reporting with two segments: United States and International.

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

During the first quarter, sales generated in the United States totaled $941.2 million (up 5.8% year over year at CER) while the same in International grossed $722 million (up 8.1% year over year at CER).

Segments

In terms of product categories, post the dental and spine arm sell off, the company continues to report through the remaining four product categories.

Sales in the Knees unit improved 11% year over year at CER to $662.8 million. Hips recorded a 4.5% rise at CER to $451 million. Revenues in the S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) unit increased 1.8% year over year to $416.8 million.

Other revenues rose 11.5% to $132.6 million.

Earlier the company noted that its CMFT (Craniomaxillofacial and Thoracic) products, previously reported in the Dental, Spine & CMFT category, are now included in the S.E.T. category.

Margins

Gross margin, after excluding intangible asset amortization, was 69.9%, reflecting a contraction of 282 basis points (bps) in the first quarter. Selling, general and administrative expenses were up 4.2% to $684.5 million. Research and development expenses rose 19.6% to $96.9 million. Adjusted operating margin contracted 359 bps to 64.1% in the quarter.

Cash Position

Zimmer Biomet exited the first quarter of 2022 with cash and cash equivalents of $435.8 million compared with $378.1 million at the end of the fourth quarter of 2021.

Cumulative net cash provided by operating activities at the end of the first quarter was $315.7 million compared with $223.5 million in the year-ago period.

2022 Guidance

Zimmer Biomet updated its financial guidance for 2022.

Revenues are expected to be down 1.5% to up 0.5% (an improvement from the earlier band of flat to down 4%) compared with 2021.

Adjusted EPS for the full year is expected in the range of $6.65-$6.85 (a rise from the projection of $6.40-$6.80 earlier).

The Zacks Consensus Estimate for 2022 adjusted earnings is pegged at $6.52 on revenues of $6.74 billion.

Our Take

Zimmer Biomet ended the first quarter of 2022 with better-than-expected earnings and revenues. Each of the company’s geographic segments and product divisions recorded year-over-year sales growth at CER. A raised 2022 guidance is indicative of this improving trend to continue for the rest of the year. However, a massive contraction in both the company’s gross and operating margins is concerning.

As a major development, in Q1, Zimmer Biomet successfully completed the spinoff of ZimVie, Zimmer Biomet's former spine and dental businesses.

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 Molina Healthcare, Inc. MOH, UnitedHealth Group Incorporated UNH and Alkermes plc ALKS.

Molina Healthcare, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of $4.90, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $7.77 billion outpaced the consensus mark by 3.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Molina Healthcare has an estimated long-term growth rate of 16.4%. MOH’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 1.5%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.

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