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Why Zimmer Biomet Could See Revenue Growth in 1Q17

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Revenue estimates

On April 27, 2017, Zimmer Biomet Holdings (ZBH) will announce its 1Q17 earnings. Wall Street analysts expect Zimmer Biomet’s 1Q17 revenue to be about $1.96 billion, a ~3% increase on a YoY (year-over-year) basis. In comparison, the company registered revenue of around $2 billion in the previous quarter, which represents YoY growth of ~4%.

The graph above shows a comparison of analysts’ estimates for the company and the actual reported revenue. In 4Q16, Zimmer Biomet exceeded analysts’ revenue estimates by 1.5%. The company reported revenues of ~$2.01 billion, whereas analysts estimated ~$1.98 billion.

The revenue estimates for 1Q17 take into account the impact of pricing pressures, currency headwinds, intense market competition, macroeconomic challenges, integration synergies, innovative and market leading products, and other acquisition costs and synergies.

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Company guidance

For 2017, the company is expected to generate adjusted pro forma revenue growth of 2.2%–3.2%. In 4Q16, currency headwinds had a negative impact of around 0.2%, which is expected to drop in 1Q17. The pricing pressure is expected to continue to impact ZBH’s sales, whereas the LDR sales will likely boost sales in 1Q17. Supply chain issues are expected to be resolved in the first half of 2017 as the company clears back orders, prioritizes production for key cross-sell brands, and restores safety stocks.

Peers Stryker (SYK), Thermo Fisher Scientific (TMO), and Medtronic (MDT) are expected to generate revenues of $2.9 billion, $4.7 billion, and $7.9 billion, respectively, during their recent quarters. Investors can gain exposure to Zimmer Biomet by investing in the Vanguard S&P 500 ETF (VOO). VOO invests ~0.12% of its total holdings in ZBH.

In the next article, let’s discuss the company’s recent acquisitions.

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