Zimmer Biomet Q3 Earnings Top but Revenue Miss Causes Pre-Market Drop

Core Insights - Zimmer Biomet Holdings, Inc. (ZBH) reported third-quarter 2025 adjusted earnings per share (EPS) of $1.90, exceeding the Zacks Consensus Estimate by 1.06% and reflecting a year-over-year increase of 9.2% [1][9] - The company's net sales for the third quarter reached $2.00 billion, marking a 9.7% increase year over year, but fell short of the Zacks Consensus Estimate by 0.4% [3][9] - Following the earnings announcement, ZBH's shares declined by 8.1% in pre-market trading [2] Revenue Performance - U.S. sales totaled $1.16 billion, up 10.6% year over year, while international sales reached $837.3 million, reflecting an 8.5% increase year over year [4] - Revenue growth in the Knees segment was 5.3% year over year at constant exchange rates (CER) to $792.4 million, while the Hips segment grew 3.8% to $506.2 million [5] - The S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic) unit saw a significant revenue increase of 18.2% year over year at CER to $541.5 million [6] Margin and Expense Analysis - Adjusted gross margin expanded by 158 basis points year over year to 72.1%, while selling, general, and administrative expenses rose by 14.3% to $811.4 million [7] - Research and development expenses increased by 3.9% to $115.9 million, and adjusted operating margin improved by 27 basis points to 25.7% [7] Cash Position - At the end of the third quarter, ZBH had cash and cash equivalents of $1.29 billion, a significant increase from $525.5 million at the end of the second quarter [10] - Cumulative net cash provided by operating activities was $1.18 billion, compared to $993.1 million in the same period last year [10] Updated Financial Guidance - ZBH reiterated its reported revenue growth guidance for 2025 in the range of 6.7% to 7.7%, but narrowed the upper limit of its constant currency revenue growth outlook to 6.2% - 6.7% [11] - The adjusted EPS guidance for the full year remains in the range of $8.10 to $8.30, while the Zacks Consensus Estimate for adjusted EPS is $7.95 [11] Market Reaction and Outlook - Despite the adjusted EPS beating expectations and margin expansion, the overall performance disappointed investors, as indicated by the share price decline [12] - The company’s performance in key categories like Knees and Hips was softer than expected, leading to a more cautious outlook on demand [12]