Zimmer Biomet raises its outlook as knee sales turn downward
Growth elsewhere supports the higher sales outlook. Fewer shares keep adjusted earnings per share flat despite a decline in total adjusted profit.
Zimmer Biomet raised its annual sales outlook even as its knee business slipped into decline. Growth elsewhere in the orthopedic supplier's portfolio is carrying more of the load.
Knee sales fell 2.6% in constant currency in the third quarter, compared with 0.1% growth in the previous quarter. Total company sales grew 3.7% in constant currency.
Knees fall behind the rest of the portfolio
Knee revenue was $767.5 million. Hip sales grew 7% in constant currency, while the S.E.T. group, which includes sports medicine and extremities, grew 7.1%. Technology and related products grew 13%.
In its quarterly report, Zimmer Biomet said overall growth benefited from new acquisitions, some end-of-quarter customer purchases and demand for other products.
Fewer shares support flat earnings per share
Research by Ticker Byline shows that adjusted net income fell to $362.8 million from $377 million, while adjusted earnings per share stayed at $1.90. The weighted-average diluted share count fell to 191.4 million from 198.8 million, spreading the smaller profit across fewer shares.
Adjusted operating profit also declined, to $518.8 million from $531 million. The company sold more overall but earned less adjusted operating profit.
The reported comparison was harsher. Net income fell to $191.6 million from $230.9 million. Last year's quarter included a $55.1 million gain from revised acquisition-payment estimates, compared with a $6 million expense this year.
A modestly stronger outlook
Zimmer Biomet now expects annual organic sales growth in constant currency of 3% to 3.5%, up from 2.25% to 3.25%. Its organic definition removes the Paragon 28 acquisition's contribution only through that deal's April anniversary, rather than excluding every recent acquisition.
The adjusted earnings forecast moves to $8.50 to $8.60 per share from $8.47 to $8.59. Cash generation provides a stronger counterpoint: quarterly free cash flow rose to $372.4 million from $277.6 million, after spending on surgical instruments and other capital assets.
The Zimmer Biomet profile tracks the completed acquisitions, upcoming payments and distributor transition alongside the sales and earnings comparison.