Zimmer Biomet
(NYSE: ZBH)
shares are down despite fourth-quarter results that topped the consensus forecast.
The Warsaw, Indiana–based orthopedics device company is shedding hundreds of jobs in a new round of restructuring.
Mike Matson, senior research analyst at Needham & Co., noted ZB’s Street-beating Q4 and its above-consensus 2024 projections. Still, the company has been losing share in the global hip and knee replacements market, he said.
Matson kept Needham & Co.’s Hold rating on Zimmer Biomet shares, saying: “Even if ZBH’s growth is slightly higher, we think it will have difficulty achieving significant earnings leverage. And ZBH seems likely to pursue M&A, which could be dilutive and result in another headwind to earnings growth.”
Truist analysts said they and investors had hoped for more from the company’s U.S. large-joint businesses
Shares of ZBH shares fell 4.5% at $121.79 apiece in early-morning trading on the day of the earnings release. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — dipped 0.3%.
By the next day, the company’s stock was down more than 3% for the week.
Zimmer Biomet announced in its earnings report that it initiated a global restructuring program late in 2023. It aims to optimize its cost base and drive greater efficiencies. The company anticipates approximately $200 million in run-rate cost savings as it exits 2025 as a result.
According to the Warsaw Times-Union, Zimmer Biomet confirmed a 3% headcount reduction from its 18,000 global positions. That would equal about 540 jobs in the reduction. Read about all the layoffs across medtech over the past two years here.
More on the restructuring
On the company’s earnings call, transcribed by SeekingAlpha, Zimmer Biomet President and CEO Ivan Tornos said virtually all reductions are non-customer-facing positions.
He said the company factored in its reductions into its guidance.
“It is tough to restructure a company,” Tornos said. “It’s certainly something that we don’t take lightly. You read the press release, we had to do it. It’s a tough choice once again, but we needed to make operational changes to simplify our structure, to deliver greater efficiency, and to ensure that we enhance investments in the right areas of the business, again closer to the customer, so again, not an easy thing to do, but something that we had to do and something that we have done.”
The rest of the results at Zimmer Biomet
The Warsaw, Indiana–based orthopedic giant posted profits of $419.2 million in the quarter. That amounts to $2.01 per share on sales of $1.94 billion for the three months ended Dec. 31, 2023.
Zimmer Biomet recorded a massive bottom-line gain compared to losses of $130.5 million in the same period last year. It posted sales growth of 6.3% year-over-year.
Adjusted to exclude one-time items, earnings per share totaled $2.20, landing 5¢ ahead of Wall Street projections. Zimmer Biomet narrowly topped expectations of $1.93 billion in revenue, too.
“We are pleased to conclude a very successful year with strong fourth-quarter results driven by consistent execution, including a healthy second-half growth profile,” said Tornos. “I’m confident in our ability to carry our 2023 momentum into 2024 and to create further value for our stakeholders. As we look ahead, we remain laser-focused on our priorities to advance people and culture, achieve operational excellence and drive innovation and diversification to deliver on our mission.”
Zimmer Biomet expects 2024 revenue growth between 4.5% and 5.5%, with adjusted EPS ranging between $8 and $8.15.
This story originally ran on Feb. 8, 2024. Updated Feb. 9 with additional analyst comment.
