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Can Zimmer Biomet Recover after Disappointing 3Q17?

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Can Zimmer Biomet Recover after Disappointing 3Q17? PART 1 OF 10

Zimmer’s Biomet’s Disappointing 3Q17: What’s behind It?

3Q17 earnings release

Zimmer Biomet Holdings (ZBH) reported sales of $1.8 billion in 3Q17, which ended on September 30, 2017. The company released its 3Q17 results on November 1, 2017. Zimmer Biomet registered a YoY (year-over-year) sales decline of 0.8%. That included a negative impact of 1.3% due to one less billing day in 3Q17 compared to 3Q16 and a 0.3% additional benefit of the sales contribution of LDR Holdings, which was acquired by Zimmer Biomet in July 2016. The reported impact of these factors is in line with the company’s expectations. For more on the LDR acquisition progress, read How Is ZBH’s Spine Business Positioned a Year after LDRH Acquisition?

Zimmer&#8217;s Biomet&#8217;s Disappointing 3Q17: What&#8217;s behind It?

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Excluding 0.4% for a positive foreign exchange impact, Zimmer Biomet Holdings reported a YoY fall in sales of 1.2% on a constant currency basis. Excluding the impact of LDR Holdings, the fall in constant currency sales was 1.5%. In the quarter, Hurricanes Irma and Maria impacted the company’s business in the Caribbean region. Also, the price cut in India for knee implants impacted the company’s sales. Both these factors are estimated to have negatively impacted ZBH’s 3Q17 sales by 0.5%.

Investors seeking diversified exposure to Zimmer Biomet Holdings can invest in the Vanguard S&P 500 ETF (VOO). VOO holds 0.12% of its total portfolio holdings in ZBH.

Major headwinds in the domestic and international markets

Zimmer Biomet Holdings reported a dismal 3Q17 performance due to a number of company-specific factors as well as external headwinds. The major company-specific factors that dragged down the company’s revenues include continued supply issues due to lower-than-expected production of certain Biomet legacy brands in 1Q17. The company is recuperating its sales and has initiated a US sales recapture program.

The external factors impacting 3Q17 sales include weak domestic market conditions and the impact of Hurricanes Maria and Irma. Also, the knee price adjustment in 3Q17 by the Indian government led to a headwind of $5 million. Some of the other companies in the medical device industry in the United States that were significantly impacted by the hurricanes in their recent quarters include Boston Scientific (BSX), Stryker (SYK), and Medtronic (MDT).

Next, let’s look at ZBH’s segment sales for 3Q17.

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