Zimmer Biomet (ZBH) added $72.4 million in new sales (year-over-year) in the June quarter, which is more than the $58.2 million added in this year’s (2024) first quarter. Total sales for the June 30 quarter were $1.942 billion, up from last year’s $1.870 billion.
Currency headwinds artificially reduced sales growth rates. Organic growth, meaning actual sales of actual products, ignoring currency swings, was 5.6%, which is decent.
U.S. knee sales kind of sucked, barely registering in positive territory, rising 0.8% to $441 million. International (and give those guys a raise) knee sales were the fastest growing sector in all of Zimmer Biomet, coming in at 11.5%, year-over-year, or $360 million. One or two more quarters like that and international knees will be bigger than U.S.
Hip sales had a similar pattern, U.S. growth at 1.8% was half the international growth rate, 3.7%. U.S. hip sales were $259 million and international, coming up fast on the outside, were $248 million.
The other highlight for ZBH was sports, extremity and trauma which posted up a 7.3% growth rate or $470 million.
A weaker dollar or, put another way, stronger OUS currencies is clearly affecting business. CEO Tornos and his team are pretty cautious about the rest of 2024. ZBH’s business, they think, can grow 5-6% (again, organic growth ignoring currency changes) this year. The September quarter, which encompasses July and August, always slow months, is likely to be ZBH’s toughest quarter while, the 4th quarter, Tornos told analysts, will likely be the best quarter of the year. Also, selling days will be less in this year’s Q3 and more in Q4—it’s just how the calendar lands.
Dancing Elephant
It’s an adage that getting a big ship like ZBH to be nimble is like teaching an elephant to dance. While it may not be Arthur Murray, investments in M&A (mergers and acquisitions) plus opportunistically entering growth markets (I’m looking at you ASC and extremities) can get the lumbering behemoth moving.
IF…entrenched management will get out of its own way. Enter CEO Tornos and his team, the youngest in probably 50 years of ZBH history. He has infused new energy into ZBH.
Case in point, this April ZBH closed on two key acquisitions: a major distributor in the Europe, Middle East and Africa market and, interestingly, Video Interventionnelle Medicale Scientifique, based just north of Toulouse in southern France. Also known as VIMS, this company has, arguably, the most advanced camera yet for arthroscopy and laparoscopy procedures. It’s ideal for ASCs, office procedures and of course extremity and sports medicine. Buying VIMS also brought in a full range—from anchors to buttons—of sports medicine implants.
When Tornos and the team bought VIMS, investors bid ZBH up to $132/share, which is about 20% higher than today’s trading price. Under Tornos, the smart investor will take a long-term view. ZBH is being led by a very talented, energetic young team. They’re teaching the elephant some new moves and the orchestra is still warming up.
