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Can Zimmer Biomet Recover after Disappointing 3Q17?

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Part 2
Can Zimmer Biomet Recover after Disappointing 3Q17? PART 2 OF 10

Supply Constraints and Zimmer Biomet’s 3Q17 Segment Performances

Segment sales in 3Q17

In 3Q17, Zimmer Biomet Holdings (ZBH) registered a YoY (year-over-year) sales growth of -1.5% on a constant currency basis. The major factor contributing to the decline was supply shortfalls and a weakness in the company’s US sales recapture program, which was led by a number of internal and external factors, as we saw in the previous part of this series. ZBH’s knee implants, hip implants, S.E.T (Sports, Extremities, and Trauma), Dental, and Spine and CMF (craniomaxillofacial) segments registered sales growth of -1.7%, -1.7%, 1.1%, -4.4%, and 0.3%, respectively, on a YoY basis.

Supply Constraints and Zimmer Biomet’s 3Q17 Segment Performances

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The day ZBH announced its 3Q17 results, the stock fell 7%. The iShares Russell Mid-Cap Value (IWS) fell 0.12% that same day. ZBH accounts for ~0.60% of IWS’s total portfolio.

Knee and hip sales

ZBH’s hip and knee sales contributed 34% and 24%, respectively, to the company’s total sales in 3Q17. The segment’s sales were impacted by a 2.5% negative pricing impact and driven by a volume and portfolio mix that had a positive impact of 0.8%. The company, however, is confident of improvement in its musculoskeletal sales, driven by a comprehensive product portfolio and planned launches ahead.

Sports, Extremities, and Trauma sales

In 3Q17, Zimmer Biomet Holdings’ S.E.T. segment’s constant currency sales rose 1.1% on a YoY basis. The segment’s sales were $407 million, which was 23% of the company’s total revenues in 3Q17. Year-to-date, the constant currency sales growth for ZBH’s S.E.T. segment was 3.7%.

Supply Constraints and Zimmer Biomet’s 3Q17 Segment Performances

Spine and CMF sales

In 3Q17, sales from ZBH’s Spine & CMF business contributed 10% to the company’s total revenues. The segment’s sales continued to be driven by the company’s market-leading product Mobi-C cervical disc. Sales of ZBH’s TraumaOne Plating System, SternaLock Blu, SternaLock 360 primary closure systems, and RibFix Blu Thoracic Fixation System in the CMF division continued to be strong in 3Q17.

ZBH is focused on expanding its Spine and CMF portfolio and expand its market share amid big market players such as Stryker (SYK), Medtronic (MDT), and Johnson & Johnson (JNJ). The company’s recent acquisition of LDR Holdings was a strategic deal in the same direction.

Dental sales

ZBH’s dental sales registered a decline of 4.4% in 3Q17. Segment revenues were $93 million, contributing 5% to the company’s total sales. The company is undergoing the restructuring of its dental business and has been implementing a number of key strategic initiatives for the long-term growth of the business. For details, read How Does ZBH Plan to Revive Growth Momentum in Dental Business?

Next, we’ll look at the company’s 3Q17 knee sales in detail and its plans going forward.

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