Zimmer Biomet (ZBH) Q4 Earnings Meet Estimates, Revenues Top

Zimmer Biomet Holdings, Inc. (NYSE:ZBH) posted fourth-quarter 2018 adjusted earnings per share (EPS) of $2.18, in line with the Zacks Consensus Estimate. Moreover, the figure improved 3.8% year over year.

Reportedly, the company reported net loss of $4.42 per share, against earnings of $6.03 in the year-ago quarter.

2018 adjusted EPS came in at $7.64, down 4.9% year over year and in line with the Zacks Consensus Estimate.

Revenue Details

Fourth-quarter net sales came in at $2.07 billion, up 0.1% (rising 1.6% at constant exchange rate or CER) year over year. The figure beat the Zacks Consensus Estimate of $2.06 billion.

Zimmer Biomet Holdings, Inc. Price, Consensus and EPS Surprise

Zimmer Biomet Holdings, Inc. Price, Consensus and EPS Surprise | Zimmer Biomet Holdings, Inc. Quote

In 2018, net sales totaled $7.93 billion, up 1.7% year over year (up 0.8% at CER). The figure beat the Zacks Consensus Estimate of $7.92 billion.

During the quarter under review, sales generated in the Americas totaled $1.26 billion (down 1% year over year at CER), while the same in EMEA (Europe, the Middle East and Africa) grossed $476 million (up 4.7% year over year at CER). Nevertheless, Asia-Pacific registered 7.2% growth at CER to $336 million.

Segments

Sales in the Knees unit inched up 1.6% year over year at CER to $729 million. Hips recorded a 1.8% increase at CER from the prior-year quarter’s tally to $498 million. Revenues in the S.E.T. (Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma) unit rose 3.1% year over year to $461 million.

Among the other segments, Spine & CMF were up 3.1% at CER to $198 million, while Dental declined 1.8% to $104 million. Other revenues were down 6.4% to $81 million.

Margins

Gross margin after excluding intangible asset amortization came in at 71.8%, reflecting an expansion of 40 bps in the fourth quarter. Selling, general and administrative expenses were up 15.4% to $998.6 million. Further, research and development expenses rose 6.5% to $101.2 million. Adjusted operating margin declined 630 bps to 18.7% during the quarter.

Cash Position

Zimmer Biomet exited 2018 with cash and cash equivalents of $542.8 million compared with $524.4 million in 2017. Long-term debt at the end of 2018 totaled $8.94 billion compared with $10.14 billion at the end of 2017.

In 2018, net cash provided by operating activities was $1.75 billion compared with $1.58 billion a year ago.

2019 Guidance Initiated

The company provided 2019 revenues and adjusted EPS guidance which is as follows:

Sales in 2019 are projected to be down 0.5% to up 0.5% compared with the previous year. Per management, projected sales growth figures include 100-150 basis points of impact from an adverse currency movement. The Zacks Consensus Estimate for revenues is pegged at $7.94 billion for the current year.

Adjusted EPS for 2019 is expected in the range of $7.70-$7.90. The Zacks Consensus Estimate of $7.86 falls within but near to the high end of the guidance.

Our Take

Zimmer Biomet ended the quarter on a mixed note. The company witnessed strength in the Asia Pacific and EMEA regions as well as in the Spine & CMF business. Supported by focus on priority areas like quality remediation, supply recovery efforts and product launches, the company once again reported strong topline numbers within its S.E.T segment. However, the company’s declining dental sales at CER disappoint. We believe that escalating costs and expenses are putting pressure on the adjusted operating margin.

Zacks Rank & Key Picks

Zimmer Biomet has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Varian Medical Systems (NYSE:VAR) , AngioDynamics (NASDAQ:ANGO) and CONMED Corporation (NASDAQ:CNMD) .

AngioDynamics’ fiscal second-quarter adjusted earnings of 22 cents per share beat the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, surpassing the consensus mark by 2.9%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Varian’s fiscal first-quarter adjusted earnings of $1.06 per share were in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2 (Buy).

CONMED’s fourth-quarter adjusted EPS of 73 cents met the Zacks Consensus Estimate. Revenues of $242.4 million surpassed the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank #2.

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