Zimmer Biomet-ZBH's Q4 Earnings Beat, Margins Contract, Stock Down in Premarket

Core Insights - Zimmer Biomet Holdings, Inc. (ZBH) reported fourth-quarter 2024 adjusted earnings per share (EPS) of $2.31, slightly exceeding the Zacks Consensus Estimate by$ 0.01, marking a 5% increase year over year [1][3] - The company’s full-year adjusted EPS for 2024 was $8.00, reflecting a 5.9% improvement from 2023, also beating the Zacks Consensus Estimate by$ 0.01 [3] - Following the earnings announcement, ZBH shares fell over 1.3% in pre-market trading [3] Financial Performance - ZBH's fourth-quarter net sales reached $2.02 billion, a 4.3% increase year over year (4.9% at constant exchange rates), surpassing the Zacks Consensus Estimate by 0.6% [4] - For the full year, ZBH generated revenues of$ 7.68 billion, up 3.8% from the previous year (4.8% at constant exchange rates), also exceeding the Zacks Consensus Estimate by 0.1% [4] Revenue Breakdown - In Q4, U.S. sales totaled $1.18 billion, up 4.7% year over year, while international sales were$ 842 million, reflecting a 3.7% increase year over year (5.2% at constant exchange rates) [5] - Revenue from the Knees segment grew 5.6% year over year at constant exchange rates to $839.2 million, while the Hips segment saw a 4% increase to$ 520 million [6] - The S.E.T. segment reported an 8.4% year-over-year growth at constant exchange rates, reaching $489.4 million, while the "Other" category saw a decline of 4.3% to$ 174.6 million [7] Margin Analysis - Adjusted gross margin was 71%, down 123 basis points year over year, while adjusted operating margin contracted 43 basis points to 28.7% [8] - Selling, general and administrative expenses rose 3.4% to $746.9 million, whereas research and development expenses decreased by 4.3% to$ 108.4 million [8] Cash Position - At the end of Q4, ZBH had cash and cash equivalents of $525.5 million, up from$ 415.8 million a year ago [10] - Cumulative net cash provided by operating activities was $1.49 billion, compared to$ 1.58 billion in the previous year [10] Future Outlook - ZBH expects reported revenue growth for 2025 to be between 1% and 3.5% year over year, with an anticipated adverse impact from foreign exchange of 1.5% to 2% [11] - The company projects adjusted EPS for 2025 to be in the range of $8.15 to$ 8.35, while the Zacks Consensus Estimate stands at $8.57 [11] Strategic Developments - ZBH announced a definitive agreement to acquire Paragon 28, a company specializing in the foot and ankle orthopedic segment, which is expected to enhance ZBH's diversification strategy and growth potential in the$ 5 billion foot and ankle market [14]