Zimmer Biomet’s ZBH strategic product launches amid stabilizing market trends bolster our confidence in this stock. Yet, factors like macroeconomic uncertainties put pressure on the bottom line. The stock carries a Zacks Rank #3 (Hold) currently.

Factors Driving ZBH's Share Price

Zimmer Biomet has been witnessing strong market share gains within reconstructive Knees and Hips in key geographies in recent times despite macroeconomic challenges. The third quarter of 2024 marked the 11th consecutive quarter in which Zimmer Biomet's revenues grew by mid-single digit or above. The International business, overall, exceeded sales expectations in the third quarter, backed by strong demand in the key markets across both Reconstructive Knees, Hips and the S.E.T. categories. 

Although the company’s Knee business witnessed some challenges posed by the ERP system implementation, internationally, this business grew 10% in the quarter. Further, the Oxford Partial cementless Knee launch in 2025 is expected to drive 60% share in the European market. Within Hips, the company expects the upcoming launches of Z1 HAMMR and Navigation like OrthoGrid and ROSA posterior in Europe to drive market share. Zimmer Biomet also currently looks forward to a strong pickup of ROSA Shoulder in 2025.

Currently, Zimmer Biomet is on its diversification journey with its S.E.T. (comprising Surgical, Sports, Upper Extremities, and Restorative Therapies) business. The company has strategically grown S.E.T. sales by at least mid-single digits in recent times. Zimmer Biomet currently expects this trend to continue in 2025 and 2026, driven by consistent market share gains of CMFT (Craniomaxillofacial and Thoracic), Sports and Upper Extremities.

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 is particularly benefiting from its strong presence in emerging markets and its extended portfolio that includes upper and lower joints. According to the company, this will help develop the extremities and trauma business going forward.

Zimmer Biomet Holdings, Inc. Price

Zimmer Biomet Holdings, Inc. price | Zimmer Biomet Holdings, Inc. Quote

Within emerging markets, strength in Asia Pacific has been driving strong revenue growth so far. Banking on product launches and strong customer adoptions, Zimmer Biomet is successfully expanding its presence in emerging markets.

Over the past three months, shares of ZBH have gained 5.1% against the industry’s 0.5% decline. With the company consistently focusing on strategic market expansion and product launches, we expect the stock to continue its growth momentum in the coming days.

Factors Hindering ZBH's Growth

The ongoing industry-wide trend of staffing shortages and supply chain-related hazards is 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, a high interest rate scenario has put the dental treatment space (which is highly elective) in a tight spot. Within the Hip category, headwinds in Russia are disproportionately impacting 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 third quarter, the company incurred 3.9% increase in cost of product sold (excluding intangible asset amortization) and a 3.1% rise in selling, general and administrative expenses. Adjusted gross margin reflected a contraction of 34 basis points, while the adjusted operating margin contracted by 18 bps in the quarter.

Further, 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 and other currencies are having an adverse effect on the company’s results of operations. In the third quarter of 2024, Zimmer Biomet’s net sales were affected by 0.1% due to changes in foreign exchange rates. For the full year, the company currently expects an adverse impact of 75 basis points from foreign exchange on its revenues.

Key Picks

Some better-ranked stocks in the broader medical space are Veracyte VCYT, ResMed RMD and Omnicell OMCL.

Veracyte, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated earnings growth rate of 65.8% for 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.

VCYT’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 520.58%. Veracyte’s shares have risen 49.2% in the past year compared with the industry’s 5.5% growth.

ResMed, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 21.1% for 2025. RMD’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.41%. Its shares have risen 34.1% compared with the industry’s 7.7% growth in the past year. 

Omnicell, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 72.7% for fourth-quarter 2024. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 121.74%. OMCL’s shares have risen 26.4% against the industry’s 15.7% decline in the past year.

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