On January 30, 2018, Zimmer Biomet Holdings (ZBH) released its 4Q17 and 2017 results. During the company’s earnings release, it provided guidance for 1Q18, but it didn’t provide guidance for 2018. The company announced that it would provide 2018 guidance during its 1Q18 earnings call, as its new leadership was completing a review of its 2018 operating plan.
Zimmer Biomet Holdings registered a stock price fall of ~1% on its 4Q17 earnings announcement day. On the day, the iShares Russell 1000 Value ETF (IWD) also reported a fall of ~1.2% in its price. IWD has ~0.19% of its total holdings in ZBH stock.
ZBH’s 1Q18 guidance
In 1Q18, Zimmer Biomet Holdings expects to register sales in the range of $1.955 billion–$1.995 billion. This estimate includes a favorable currency impact of 300 basis points. On a constant currency basis, ZBH expects its 1Q18 sales to fall 4% to -2%. There will also be the negative impact of one fewer billing date in 1Q18 compared 1Q17.
ZBH’s gross margin rate is expected to fall in the range of 72%–73% 0f the company’s total sales in 1Q18 as well as in the entirety of 2018. During the initial quarters of the year, the company’s gross margin is expected to be on the lower end of the range, and it’s likely to shift toward the upper end in subsequent quarters.
In 1Q18, Zimmer Biomet Holdings expects to register adjusted diluted EPS (earnings per share) in the range of $1.84–$1.91. This expectation reflects an effective tax rate of 19%–20% in 1Q18.
ZBH’s free cash flows are expected to be in the range of $250 million–$300 million in 1Q18. Notably, the company is focused on prioritizing debt repayments for substantial capital allocation of its free cash flows.
According to Wall Street analysts’ latest estimates, peers Becton, Dickinson and Company (BDX), Baxter International (BAX), and Thermo Fisher Scientific (TMO) are expected to register sales growths of $3.1 billion, $2.8 billion, and $5.5 billion, respectively, in their upcoming quarters.