Zimmer Biomet ZBH continues to gain from procedure strength, strong execution and solid momentum in innovation. Yet the stock has been impacted by a difficult macroeconomic situation, which has increased its expenses. The stock carries a Zacks Rank #3 (Hold).
Favorable Factors For ZBH
Zimmer Biomet is diligently working to strengthen its foothold in international developed and emerging markets that provide long-term opportunities for growth. The company's strategic investments in these regions over the past several quarters to improve operational and sales performance are yielding results. The company’s business particularly benefits from its strong presence in emerging markets with an extended portfolio that includes upper and lower joints. According to the company, this will help develop the extremities and trauma business going forward.
Within emerging markets, we note that strength in the Asia Pacific market has driven strong revenue growth so far. Banking on a series of product launches and strong customer adoption, Zimmer Biomet has successfully expanded its presence in the emerging market.
Despite challenging market conditions in the form of pricing pressure, the last few quarters witnessed gradual stability in the global musculoskeletal market with better-than-expected sales growth in certain geographies, driven by improved procedural volume. This was aided by favorable demographics and the growing utilization of musculoskeletal healthcare in emerging markets and under-penetrated developed markets. The focused execution of the company's global sales teams amid a stable global musculoskeletal market also helped accelerate global sales for Persona, the personalized knee system.
In the fourth quarter of 2024, the company witnessed solid growth, driven by continued procedure strength, strong execution and solid momentum in innovation. The company saw another positive quarter of year-over-year momentum in large joints, with the overall global Knees, Hips and S.E.T. business growing 5.6%, 4% and 8.4%, respectively, at the constant exchange rate.
Zimmer Biomet Holdings, Inc. Price
Zimmer Biomet Holdings, Inc. Price
Zimmer Biomet Holdings, Inc. price | Zimmer Biomet Holdings, Inc. Quote
Over the past three months, shares of ZBH have gained 0.7% compared with the industry’s 4.6% growth. With the company consistently focusing on strategic market expansion and new product launches, we expect the stock to gain further momentum in the coming days.
Factors Impacting ZBH Stock's Growth
The ongoing industry-wide trend of staffing shortages and supply chain-related hazards are denting growth for Zimmer Biomet. Deteriorating international trade and geopolitical complications lead to a tough situation related to raw material and labor cost as well as freight charges.
Added to this, high policy rates to fight inflation, along with the gradual withdrawal of fiscal policies amid increased debt, continue to dent economic growth, impacting the overall market situation for Zimmer Biomet. Within the Hip category, headwinds in Russia are disproportionately affecting the outside U.S. business. Further, within the S.E.T. category, Zimmer Biomet is facing challenges in the form of reimbursement headwinds, particularly in the Restorative Therapies business. In addition, the company also noted acute supply challenges within Sports and Trauma. All these are creating significant pressure on the company’s revenues and operating profit.
During the fourth quarter, the company incurred a 5.1% increase in the cost of products sold (excluding intangible asset amortization) and a 3.4% rise in selling, general and administrative expenses. Adjusted gross margin reflected a contraction of 123 basis points. Adjusted operating margin contracted 43 bps in the quarter. Our model projects a 5.7% and 4.2% increase in the company’s cost of product sold and selling, general and administrative expenses for 2025, respectively.
A substantial portion of Zimmer Biomet’s foreign revenues is generated in Europe and Japan. In recent times, significant increases in the value of the U.S. dollar relative to the euro, the Japanese yen, the Swiss franc or other currencies are having an adverse effect on the company’s results of operations. In 2024, Zimmer Biomet’s net sales were adversely impacted by 1% from changes in foreign exchange rates. The company currently expects foreign exchange to have an adverse impact of 1.5%-2% on 2025 revenues.
Key Picks
Some better-ranked stocks in the broader medical space are Hims & Hers Health HIMS, Inspira Medical Systems INSP and Cardinal Health CAH. Each of these carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Estimates for Hims & Hers Health’s 2025 earnings per share have jumped 34.6% to 70 cents in the past 30 days. Shares of the company have surged 129.5% in the past year against the industry’s 14% fall. HIMS’ earnings surpassed estimates in two of the trailing four quarters, matched in one and missed on another occasion, the average surprise being 40.4%.
Inspira shares have dipped 8.9% in the past year. Estimates for the company’s 2025 earnings per share have increased 6.4% to $2.16 in the past 30 days. INSP’s earnings beat estimates in each of the trailing four quarters, the average surprise being 332.5%. In the last reported quarter, it posted an earnings surprise of 55.4%.
Estimates for Cardinal Health’s fiscal 2025 earnings per share have increased 14.7% to $7.94 in the past 30 days. Shares of the company have jumped 11.8% in the past year against the industry’s 3.9% fall. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%. In the last reported quarter, it delivered an earnings surprise of 10.3%.
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