ZBH — Two joint businesses diverge
Two replacement-joint businesses can tell different stories in the same quarter.
On November 4, $ZBH reported third-quarter sales of $2.063 billion, up 3.1% from a year earlier. Zimmer Biomet's hip sales grew 6%, while knee sales fell 3.1%. The company also raised the lower end of its forecast for full-year reported revenue growth to 4.4%, with the upper end remaining 4.9%.
Why did knees lag? CEO Ivan Tornos attributed the weakness to commercial execution as the company changes its salesforce. A competing explanation is a broader slowdown in the knee market. Those are different hypotheses, and neither should be accepted without watching what happens next.
The earnings numbers add another distinction: reported diluted earnings per share fell 13.8% to $1.00, while adjusted earnings per share held at $1.90. Adjusted figures exclude certain items and are not a replacement for reported results.
Watch knee sales and management's progress on the salesforce transition in the next few reports. Compare Zimmer's performance with other orthopedic suppliers to see whether the weakness is company-specific or more widespread.