It was a rough third quarter report to Wall Street analysts for Ivan Tornos and the team.
While sales, $2.001 billion, and operating profits, $351.3 million, were within Wall Streets expectation bands, the all mighty earnings per share, $1.16 vs Wall Street’s expected $1.88, came in somewhere south of Tierra Del Fuego.
It’s only one quarter. And when OTW dug into the numbers, a picture emerged of rising profit margins, growing cash flow and increased new technology investment. Which is kind of the best of all worlds.
So, what happened in that third quarter, what’s Wall Street now expecting for 2026…and, most importantly, what is Zimmer Biomet working on? Here’s what we know and what Wall Street’s analyst corps are saying as we near the end of 2025.
Source: RRY Publications LLC
Tale of the Tape
You can see it in the numbers below the cost of goods section. ZBH’s operating profit for Q3 literally jumped 26% to $351 million — that’s a very respectable 18% of sales, meaning Zimmer earned 18 cents on every sales dollar — after accounting for making the products, marketing the products, and investing in improving the products (R&D).
Top line, Zimmer’s Q3 sales rose 8.64%. For the full year, Wall Street was forecasting 6.91%. Umm…why the gap?
Finally, the acid test for any company in any quarter, is how much cash did they add to their balance sheet. Here is where ZBH knocked the ball out of the park.
Tornos and his team added a whopping $419 million to the cash account, bringing the total to $1.293 billion, a whopping 119% increase, more than doubling, from the same period in 2024.
Say what you will, but cash will always beat EPS in the wealth creation game.
Here’s How the Third Quarter Call Went Between Zimmer’s Team and Wall Street
Ivan Tornos, Zimmer Biomet Chairman, President and CEO; and Suky Upadhyay, CFO and EVP Finance, Operations and Supply Chain shared third quarter performance in a November earnings call.
Tornos explained that the company missed earnings expectations, reporting an EPS of $1.16 instead of Wall Street’s expected $1.88.
He said it was due to unexpected weakness late in the quarter in Eastern Europe, Latin America, and noncore segments of S.E.T. He emphasized that they have identified the issues and are working to address them.
“Overall, we are very confident in our actions and remain highly enthusiastic about the early market reception of our new products and the upcoming launches, which we do believe will be catalyst for growth,” he added.
Areas of strong growth during the quarter included total cementless knee and partial cementless knee. Total cementless knee now represents almost 30% of their total knee implants, he said.
The company’s U.S. technology and data, bone cement, and surgical sales grew significantly, rising 20.3% during the quarter.
CMFT, craniomaxillofacial thoracic, was up over 20% with new product introductions in rib trauma, cardiac surgery and neuroablation.
Upadhyay added that sales rose 5% on an organic constant currency basis and delivered adjusted earnings per share of $1.90, which was up 9.2% year-over-year.
Analysts Asked for a Product Pipeline Update
During the call, Caitlin Roberts with Canaccord Genuity asked about the company’s product pipeline, particularly the iodine technology in hips.
Tornos explained, “We’ve been working on this technology in Japan for over a decade. It is one of the most complex clinical trials that I’ve seen in my 31 years in MedTech. And it’s great news that we got approval in Japan. This is a $1.3 billion market, the second largest market outside the U.S. We’re going to be launching at the end of 2025. And yes, this is going to be a meaningful revenue contributor for 2026.”
He added, “It is differentiated technology. There’s nothing like that. It does suppress or prevent biofilm formation on the implant with, again, robust clinical data for 10 years.”
He said the technology is also getting the Breakthrough Designation in the U.S.
Rick Wise with Stifel asked about the status of the Wave 1 rollout.
Tornos said, “So Wave #1 was catching up on certain categories were absent. And that’s the lion’s share of what we’re doing with what we call the Magnificent 7. And as you saw in the U.S., we delivered 5.6% growth, and this is largely induced by this Magnificent 7.”
He added that this should accelerate in 2026, and that they have already moved into Wave 2 which is focused on customer-centric innovation, adding “How do we change the standard of care by being first to market in new technologies? That’s fully autonomous and semiautonomous robotics, that’s next-generation digital ecosystem, which we are doing.”
Wave 3 he explained is how to apply these innovation capabilities to other spaces.
Wall Street’s Outlook for 2026
ZBH’s market cap, which was $20 billion before the third quarter announcement, lost $3 billion on November 5, the day Q3 was announced. In the roughly six weeks since, Zimmer’s market value has recovered slightly to just under $18 billion.
What’s Wall Street expecting for 2026?
- Sales up 5.18% to $8.63 billion (which is a slower rate of sales growth than 2025)
- EPS up 2% to $8.17 from $8.00 estimated for 2025.
What’s Tornos and the team guiding for 2026?
While acknowledging a number of macro headwinds and not giving, yet, specific numbers for 2026, the ZBH team is saying that sales trends, product launches, and strategic acquisitions should underpin accelerated growth versus 2025.
What do we think? We think Wall Street has completely missed is what is actually going on under the hood at Zimmer Biomet. Tornos and his team have this firm running better than it has in years (look at the cash flow and rising profit margins) and is making inspired bets in revolutionary technology, anti-infection solutions, extremities and more.
If 2025 is any indication, 2026 will be one of Zimmer’s best operating years ever.
Stay tuned, for sure.
