Zimmer Biomet Sees Lift in Third-Quarter Sales Growth as Delayed Patients Return

Wide-moat Zimmer Biomet delivered strong third-quarter results that met our expectations on the top and bottom lines. Considering the solid demand for large joint replacement that we’ve seen in the third quarter and the company’s firm control over expenses, Zimmer Biomet might even slightly exceed our full-year projections given the fourth quarter tends to be seasonally stronger. However, adjusting our model for that potential outcome does not materially shift our fair value estimate. Despite the unfavorable foreign exchange, the firm racked up quarterly revenue growth of 5% in constant currency, which is roughly the level of normalized medtech growth. That’s respectable for a firm that has generally been lagging industry growth. Though this quarter might be a blip, we do expect Zimmer Biomet to move toward faster growth in the 2023-25 timeframe thanks to the improvements in its technology, pioneering of new markets slightly adjacent to its traditional strengths, and a focus on execution.