Zimmer Biomet reported $2.02 billion in sales and $389,000 million in operating profit for the quarter ending December 31, 2024, which was just above Wall Street’s expectations and met management’s guidance.
Full-year net sales were $7.679 billion increased 3.8% and 4.8% on a constant currency basis.
Buying Paragon 28 and Scaling Back 2025 Expectations
Ivan Tornos, Zimmer Biomet president and CEO, told analysts in a recent earnings call, “I’m very happy to report that in the fourth quarter of 2024, we grew sales nearly 5% constant currency. This marks the 12th consecutive quarter of mid-single-digit or better constant-currency revenue growth for Zimmer Biomet. This performance in the quarter was driven by mid-single-digit growth in Hips and Knees as well as upper single-digit growth in S.E.T. [Sports Medicine, Extremities, Trauma, Craniomaxillofacial, and Thoracic].”
“These results are particularly noteworthy given the backdrop of the ERP implementation challenges outlined in September. In line with our expectations, we have now exited 2024 at pre-ERP shipping levels as evidenced by the large volume of shipments that we show in the quarter,” he explained.
He added, “As we look into 2025, we are providing full year financial guidance of constant currency revenue growth of 3% to 5% and adjusted earnings per share of $8.15 to $8.35, which excludes any impact from the Paragon 28 acquisition.”
Paragon 28 was established in 2010 to address the unmet needs in the foot and ankle space with products like its TenoTac Soft Tissue Fixation System and the Phantom Fibula Nail System.
During the call, Tornos also laid out the company’s priorities for 2025 and explained that they are going to continue to focus on people and culture, operational excellence and innovation and diversification.
He emphasized a couple of key advancements:
- New leadership roles like new president for Global Hips, new president for Global Knees, new president for S.E.T and new leader for global medical education.
- New direct-to-patient program with Arnold Schwarzenegger as Chief Movement Officer.
- Launch of 50 new products in the next 36 months.
- New ROSA applications, including CT scan capabilities, kinematic alignment for knees and a posterior hip robotic approach.
Tornos added that they are focused on improving their performance in the U.S. market.
He said, “We know that our performance has not been consistent and we’re going to do a far better job in this regard. This means specializing more aggressively in S.E.T., ensuring that we had the right go-to-market formula in all key franchises with the right productivity and the right talent, adding new capabilities and expanding the portfolio and partnerships in the ASC [ambulatory surgery center] environment. We like where we are but want to be bolder in ASCs and continue to launch innovative solutions in robotics while ensuring that we’ll also have the right number of head counts to drive growth in this vital area.”
Suketu Upadhyay, CFO and EVP of Finance, Operations and Supply Chain, broke down some of the numbers for the quarter. Zimmer Biomet grew sales almost 5% on a constant-currency basis and expanded adjusted operating margins by 40 basis points. It also grew adjusted earnings per share by 6% to $8, with over $1 billion in free cash flow.
Net sales were $2.023 billion, an increase of 4.3% on a reported basis and 4.9% excluding the impact of foreign currency. Consolidated pricing was positive 60 basis points, marking the fourth consecutive quarter of positive pricing.
U.S. business grew 4.7%, driven by strong high single-digit growth in S.E.T. while international grew 5.2%, driven by high single-digit growth in Knees and S.E.T.
Global Knees grew 5.6% in the quarter with the U.S. growing 3.9% and international growing 8%. Global Hips grew 4%, with the U.S. growing 3.2% and international growing 4.8%. S.E.T. segment grew 8.4%, led by CMFT (Craniomaxillofacial) at 13%, Sports at 22% and Upper Extremities at 8%.
He added, “While still in early days, we are encouraged by the feedback on Z1 and look forward to accelerating the rollout of HAMMR in tandem with OrthoGrid. We now have a complete product portfolio in Hips, and we’ll be accelerating our offensive strategy as 2025 progresses.
“Finally, we renamed the Other category to Technology & Data, Bone Cement and Surgical to better represent the revenue within that segment. This segment declined 4.3% due to tough comps from the prior year.”
For 2025, Zimmer Biomet expects a constant-currency revenue growth of 3% to 5%.
Wall Street Analysts Look for Answers on Impact of Potential Tariffs
Robbie Marcus with JPMorgan questioned about the more conservative guidance for 2025.
Tornos explained, “So I would say that it’s somewhat of a different philosophy guidance-wise from 2024. And as I said before, we’re not going to apologize for the guidance we delivered in 2024 early in the year. We actually met the guidance, as you heard today, in revenue, EPS, adjusted EPS and free cash flow. I think we are 20 basis points below revenue.”
“That said, for 2025 is a different philosophy. We deem the range that we’re providing today to be appropriate. I don’t know if I’ll use the word conservative, but definitely appropriate. Keep in mind there is 1 day less in 2025 versus 2024.”
He emphasized though that there are important drivers which will bring them to the upper range of that guidance like the new product launches, the investments in the ambulatory surgical space, and return of investment in OpEx.
Vikramjeet Chopra with Wells Fargo asked about how manufacturing might be impacted by tariffs on Mexico and Canada.
Tornos explained that they do not have any manufacturing plants in Mexico or Canada and that two-thirds of their manufacturing is done in the U.S. A small amount of their manufacturing is done in China, so they are keeping any eye on potential tariffs there.
“There are single-digit volumes coming out of there manufacturing-wise. But at present time, all the scenario planning that we’ve done is embedded in the guidance provided.”
