Segments are growing: Even as foreign currency and supply chain challenges put pressure on Zimmer Biomet’s earnings, the company still beat its internal expectations for the quarter. CEO Bryan Hanson said on a Tuesday earnings call that new products and procedure recovery from the pandemic helped drive the result. Excluding the impact of foreign exchange rates, most of Zimmer’s business segments grew in the quarter:
- Knees: net sales increased 11.2%
- Hips: 8.6% increase
- Sports medicine, extremities and trauma (S.E.T.): 0.1% increase
- Other (includes ROSA): 6.1% decrease
The first three categories also grew compared to 2019, before the COVID-19 pandemic affected elective procedures, analysts with investment banking company Stifel wrote in a Tuesday research note. They said their reaction to the results is “unquestionably positive.”
The company’s stock, trading above $115 Tuesday afternoon, was up by 5.17% from market open.
ROSA placements: Installments of the company’s ROSA surgical robots continue to be strong, Hanson said, but it saw lower sales due to more placements than upfront sales of the devices. This is similar to comments from competitor Stryker, which said demand for its robots was steady, but more hospitals were choosing leasing or financing over upfront purchases.
Zimmer also said its robots are being used in a mix of settings, with about 30% of installations taking place in ambulatory surgery centers.
Procedure cancellations: In June and July, the company experienced more procedure cancellations due to the COVID-19 pandemic. Unlike the earlier stages of the pandemic, this wasn’t from hospitals being overcrowded, but rather from staff members or patients testing positive for the virus.
“As a result of that, they could not carry on with the procedure,” Hanson said. “And what we're saying is that we believe that could continue.”
M&A plans: After spinning out its spine and dental businesses earlier this year, Zimmer is looking for more small- to medium-size deals. The company is looking at faster-growth segments of its orthopedics markets, such as extremity, sports and ASC settings, as well as segments of its reconstruction business, such as data and robotics. Zimmer is also looking to diversify its revenue outside of traditional orthopedics, with an eye for procedures that are less elective, Hanson said.
“We've got a lot of things that we're interested in, and now we have a little more financial flexibility to move in that direction,” the CEO said.
Raising forecast: Zimmer raised the forecast for its top line, profit margins and earnings per share. The company now expects its revenue for 2022 to fall between a 1% decrease and 1% increase compared to 2021. It expects an adjusted operating profit margin between 26.75% and 27.75%, and adjusted diluted earnings per share between $6.70 and $6.90.
