We See Signs of Improvement in Zimmer Biomet's First Quarter; No Change to Our Fair Value Estimate

Zimmer Biomet delivered first-quarter results that slightly exceeded our expectations on the top line, but this was offset by a slight lag compared with our estimates for the bottom line. As a result, we’re leaving our fair value estimate unchanged. While foreign exchange and inflationary headwinds tugged at Zimmer Biomet in the quarter, the firm’s 7% revenue growth year over year was solid. As with other medical device makers, Zimmer Biomet’s business was also buffeted by the rise and fall of the omicron variant in early 2022. However, we see little to suggest that underlying demand has changed, or that Zimmer Biomet’s wide economic moat has been hurt. We were reassured by management’s comments that procedure cancellation rates by the end of the first quarter were commensurate with prepandemic levels.