ZBH Stock to Gain From Global Expansion Amid Difficult FX Scenario

Core Viewpoint - Zimmer Biomet (ZBH) is experiencing growth driven by strong procedural performance, effective execution, and innovation momentum, although the stock is facing challenges from a tough macroeconomic environment that has increased expenses [1] Group 1: Growth Factors - The company is focusing on strengthening its presence in both developed and emerging international markets, which are expected to provide long-term growth opportunities [2] - Strong revenue growth in the Asia Pacific market has been noted, supported by product launches and customer adoption [3] - The global musculoskeletal market has shown gradual stability, with improved sales growth in certain regions due to favorable demographics and increased healthcare utilization [4] Group 2: Financial Performance - In Q4 2024, Zimmer Biomet reported growth in large joints, with global sales for Knees, Hips, and S.E.T. increasing by 5.6%, 4%, and 8.4% respectively at constant exchange rates [5] - Over the past three months, ZBH shares have increased by 0.7%, while the industry has grown by 4.6% [6] Group 3: Challenges - Industry-wide staffing shortages and supply chain issues are negatively impacting growth [7] - High policy rates and geopolitical complications are affecting raw material and labor costs, as well as freight charges [8] - The company is facing reimbursement challenges in the Restorative Therapies business and acute supply challenges in Sports and Trauma, which are pressuring revenues and operating profits [8] Group 4: Cost and Margin Analysis - In Q4, the cost of products sold increased by 5.1%, and selling, general, and administrative expenses rose by 3.4%, leading to a contraction in adjusted gross margin by 123 basis points and adjusted operating margin by 43 basis points [9] - Projections indicate a 5.7% increase in the cost of products sold and a 4.2% rise in selling, general, and administrative expenses for 2025 [9] Group 5: Foreign Exchange Impact - A significant portion of Zimmer Biomet's revenues comes from Europe and Japan, where the strengthening U.S. dollar has adversely affected operations [10] - In 2024, net sales were impacted by a 1% decline due to foreign exchange rate changes, with expectations of a 1.5%-2% adverse impact on 2025 revenues [11]