ZBH's Q4 Earnings Beat, Margins Contract, Stock Down in Premarket

Zimmer Biomet Holdings, Inc. ZBH posted fourth-quarter 2024 adjusted earnings per share (EPS) of $2.31, beating the Zacks Consensus Estimate by a penny. The adjusted figure increased 5% year over year.See the Zacks Earnings Calendar to stay ahead of market-making news.The quarter’s adjustments included certain amortization, restructuring and other cost reduction initiatives, certain litigation charges and European Union Medical Device Regulation-related charges, among others.On a reported basis, the company registered earnings of $1.20 per share, down 40.3% year over year.For the full year, adjusted EPS was $8.00, a 5.9% improvement from 2023. The adjusted figure beat the Zacks Consensus Estimate by a close margin of 0.1%.Following the announcement, shares of ZBH dropped more than 1.3% in pre-market trading today.ZBH's Q4 RevenuesFourth-quarter net sales of $2.02 billion increased 4.3% (up 4.9% at constant exchange rate or CER) year over year. The figure exceeded the Zacks Consensus Estimate by 0.6%.In 2024, the company generated revenues of $7.68 billion, up 3.8% from the prior year (up 4.8% at CER). The figure exceeded the Zacks Consensus Estimate by 0.1%.Zimmer Biomet Holdings, Inc. Price, Consensus and EPS Surprise Zimmer Biomet Holdings, Inc. price-consensus-eps-surprise-chart | Zimmer Biomet Holdings, Inc. QuoteZBH's Revenues by GeographyDuring the fourth quarter, sales generated in the United States totaled $1.18 billion (up 4.7% year over year), while International sales grossed $842 million (up 3.7% year over year and 5.2% at CER).Our model projected revenues in the United States to be $1.17 billion and International sales to be $843 million.Segmental Analysis of ZBH's RevenuesThe company currently reports through four product categories — Knees, Hips, S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) and Other.Sales in the Knees unit improved 5.6% year over year at CER to $839.2 million. Our model estimate was pegged at $832.2 million.Hips recorded 4% growth in the fourth quarter at CER to reach $520 million. Our model estimate was $541.7 million for the same.Revenues in the S.E.T. unit were up 8.4% year over year at CER to $489.4 million. Our model estimate was $477.1 million.Technology & Data, Bone Cement and Surgical (historically referred to as "Other")revenues decreased 4.3% to $174.6 million at CER in the fourth quarter. Our model estimate was $160.6 million. ZBH's Margin PerformanceAdjusted gross margin, after excluding the impact of intangible asset amortization, was 71%, reflecting a contraction of 123 basis points (bps) in the fourth quarter. Selling, general and administrative expenses rose 3.4% to $746.9 million. Research and development expenses declined 4.3% to $108.4 million. Adjusted operating margin contracted 43 bps to 28.7% in the quarter.ZBH's Cash PositionZimmer Biomet exited the fourth quarter with cash and cash equivalents of $525.5 million compared with $415.8 million a year ago.Cumulative net cash provided by operating activities at the end of the fourth quarter was $1.49 billion compared with $1.58 billion in the year-ago period.An Updated 2025 Outlook From ZBHZimmer Biomet provided its financial guidance for 2025.Reported revenue growth is expected to be in the band of 1%-3.5% year over year. The company currently expects foreign exchange to have an adverse impact of 1.5%-2% on revenues.Adjusted EPS for the full year is expected in the range of $8.15-$8.35.The Zacks Consensus Estimate for 2025 adjusted EPS is pegged at $8.57 on revenues of $8.01 billion.Our Take on ZBHZimmer Biomet ended the fourth quarter of 2024 with earnings and revenues exceeding the respective Zacks Consensus Estimate. However, the magnitude of the earnings and revenue beat was quite marginal.The quarter’s performance benefited from ZBH’s diversified portfolio outside of core orthopedics and the company’s strategic investments in attractive, higher-growth segments. Barring the Technology & Data, Bone Cement and Surgical segment, all other business divisions reported year-over-year CER growth. Performance across the geographic regions was solid as well. However, contractions in both gross and operating margins were discouraging.Zimmer Biomet has announced a definitive agreement to acquire Paragon 28, a medical device company specializing in the foot and ankle orthopedic segment. This acquisition underscores Zimmer Biomet's commitment to expanding into higher-growth markets, particularly the $5 billion foot and ankle sector. According to the company, the acquisition of Paragon 28 represents a significant move in advancing its diversification strategy. Upon completion of the transaction, Zimmer Biomet expects its S.E.T. business to surpass its Hip business in size and achieve a substantially higher growth rate.ZBH's Zacks Rank and Key PicksZimmer Biomet currently carries a Zacks Rank #4 (Sell).Some better-ranked stocks from the broader medical space are Quest Diagnostics DGX, ResMed RMD and Cardinal Health CAH.Quest Diagnostics reported fourth-quarter 2024 adjusted EPS of $2.23, which topped the Zacks Consensus Estimate by 1.8%. Revenues of $2.62 billion beat the Zacks Consensus Estimate by 1.9%. DGX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.DGX has an earnings yield of 5.9% compared with the industry’s 4.1% yield. The company surpassed earnings estimates in each of the trailing four quarters, the average surprise being 3.8%.ResMed, carrying a Zacks Rank #2, posted second-quarter fiscal 2025 adjusted EPS of $2.43, topping the Zacks Consensus Estimate by 5.6%. Revenues of $1.28 billion exceeded the Zacks Consensus Estimate by 1.6%.RMD has an estimated fiscal 2025 earnings growth rate of 21.9% compared with the industry’s 13.2%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.9%.Cardinal Health, carrying a Zacks Rank #2, posted second-quarter fiscal 2025 adjusted EPS of $1.93, topping the Zacks Consensus Estimate by 10.3%. Revenues of $55.26 billion exceeded the Zacks Consensus Estimate by 0.7%.CAH has an estimated five-year earnings growth rate of 10.7% compared with the industry’s 9.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report Cardinal Health, Inc. (CAH): Free Stock Analysis Report ResMed Inc. (RMD): Free Stock Analysis Report Zimmer Biomet Holdings, Inc. (ZBH): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks