Overview:
Zimmer Biomet’s 1Q25 beat Wall Street’s estimates and was a great way to start the year.
Zimmer Biomet Holdings, Inc. reported $1.99 billion in sales and 10% more profits ($292 million) year-over-year at the operating line for the quarter ending March 31, 2025, which beat Wall Street’s estimates and was a great way to start the year.
Zimmer Biomet Grows First Quarter Sales 2.3%
Ivan Tornos, Zimmer Biomet president and CEO; and Suketu Upadhyay, chief financial officer and executive vice president, gave an update on the company’s first quarter performance in a recent call with analysts.
Tornos reported that first quarter sales grew 2.3% constant currency, with U.S. hips being up almost 4%.
He added that they also expect cementless knee to be a significant driver of growth in the U.S. this year.
“We have now 25% penetration with cementless knees in the U.S. and expect that trend to accelerate now that we have performed widespread customer and sales representative training and have ample supply to drive increased penetration. Similarly, the European launch of Persona Revision, the leading revision implant in the U.S. should continue to gain traction throughout the year,” he explained.
Tornos added that the ZBH team is maintaining full year organic constant currency revenue growth expectations of 3% to 5% which excludes contribution from the Paragon 28 acquisition.
“As of April 21 [2025], Paragon 28 is now part of the Zimmer Biomet family and we’re very proud of this achievement. This successful integration of the acquisition has been and will continue to be a top priority,” he said.
Upadhyay gave a closer look at the first quarter’s numbers. He said net sales were $1.99 billion, an increase of 1.1% on a reported basis and 2.3% excluding the impact of foreign currency.
He said both the closing of the Paragon 28 transaction and the impact of global tariffs are factored in their guidance.
“When accounting for these changes, we now expect 2025 reported sales growth of 5.7% to 8.2%. EPS $7.90 to $8.10 and free cash flow of $750 million to $850 million.”
Tariffs Were a Big Concern for Analysts
Robbie Marcus with JPMorgan was surprised at the smaller impact of tariffs on EPS and asked for more detail on mitigation efforts.
Upadhyay said that most of their production and manufacturing is done in the United States so there is a lower impact for them.
He added, “But we have already taken some early steps to mitigate the impact of tariffs. A couple of the big ones are optimizing our view of country of origin as well as transfer pricing.”
“Secondly, we’ve made adjustments to our sourcing through our dual sourcing and redundant sourcing where it makes sense. And then thirdly, we’ve moderated some of our discretionary spending in areas that don’t really impact near-term or long-term revenue growth.”
Josh Jennings with TB Cowen asked about the company’s performance in the ambulatory surgery center (ASC) versus hospital channel.
Tornos explained that about 20% of their sales in the United States now come from the ASC environment which is a shift. Before COVID, it was 2% to 4%.
He added, “We continue to believe that the number is going to grow. The data that we are translating shows that between 40% to 60% of sales in the next five years are going to come from an ASC environment.”
