ZBH Stock to Gain Support From Market Share Gains Amid Macro Issues

Core Viewpoint - Zimmer Biomet's strategic product launches and stabilizing market trends enhance confidence in the stock, despite macroeconomic uncertainties impacting the bottom line [1] Factors Driving ZBH's Share Price - Zimmer Biomet is gaining strong market share in reconstructive knees and hips across key geographies, with revenues growing mid-single digits for 11 consecutive quarters [2] - The international business exceeded sales expectations in Q3 2024, driven by strong demand in reconstructive knees, hips, and S.E.T. categories [2] - The knee business grew 10% internationally in the quarter, despite challenges from ERP system implementation [3] - Upcoming product launches, such as the Oxford Partial cementless Knee in 2025, are expected to capture 60% of the European market [3] - Anticipated launches of Z1 HAMMR and Navigation products are expected to drive market share in hips [3] - The company is focusing on the ROSA Robotic Platform combined with the Persona cementless Knee, aiming to increase robotics and cementless penetration from 20% to 50%-60% [5] Factors Affecting ZBH's Growth - Industry-wide staffing shortages and supply chain issues are negatively impacting growth [8] - Geopolitical complications and high interest rates are affecting raw material and labor costs, particularly in the dental treatment space [8] - Challenges in the hip category due to headwinds in Russia are impacting international business [8] - Reimbursement headwinds in the Restorative Therapies business are creating challenges within the S.E.T. category [8] - Acute supply challenges in Sports and Trauma are also pressuring revenues and operating profit [8] Financial Performance - In Q3, Zimmer Biomet experienced a 3.9% increase in cost of products sold and a 3.1% rise in selling, general, and administrative expenses [9] - Adjusted gross margin contracted by 34 basis points, while adjusted operating margin contracted by 18 basis points [9] - Foreign exchange fluctuations negatively impacted net sales by 0.1% in Q3 2024, with an expected adverse impact of 75 basis points for the full year [10]