Zimmer Biomet(US:ZBH) ZACKS·2025-01-21 16:36Core Viewpoint - Zimmer Biomet's strategic product launches and market share gains in reconstructive knees and hips are encouraging, although macroeconomic uncertainties are impacting profitability [1] Factors Driving ZBH's Share Price - Zimmer Biomet has achieved strong market share gains in reconstructive knees and hips, with revenues growing by mid-single digits for 11 consecutive quarters [2] - The international business exceeded sales expectations in Q3 2024, driven by strong demand in key markets [2] - The knee business grew 10% internationally despite challenges from ERP system implementation, and the Oxford Partial cementless Knee launch in 2025 is expected to capture 60% of the European market [3] - Upcoming launches in the hip category, including Z1 HAMMR and navigation technologies, are anticipated to enhance market share [3] - The S.E.T. (Surgical, Sports, Upper Extremities, and Restorative Therapies) business has seen mid-single digit sales growth, with expectations for continued growth in 2025 and 2026 [4] - Strategic investments in developed and emerging markets are yielding positive results, particularly in Asia Pacific, contributing to revenue growth [5][6] Factors Hindering ZBH's Growth - Industry-wide staffing shortages and supply chain issues are negatively affecting growth [7] - Geopolitical complications and high interest rates are impacting raw material and labor costs, particularly in the dental treatment space [7] - The S.E.T. category faces reimbursement challenges, especially in Restorative Therapies, along with acute supply challenges in Sports and Trauma [8] - In Q3, the company experienced a 3.9% increase in cost of products sold and a 3.1% rise in selling, general, and administrative expenses, leading to a contraction in adjusted gross and operating margins [9] - Foreign exchange fluctuations have adversely impacted net sales, with an expected 75 basis point negative effect on revenues for the full year [10]