Investors couldn't have been overjoyed with Zimmer Biomet Holdings (NYSE: ZBH) when the company announced its quarterly results in February. Revenue increased only 0.1% compared to the prior-year period, while earnings rose year over year by 3.8%.
Zimmer Biomet announced its first-quarter results before the market opened on Friday. Was there much for investors to like this time around? Here's what you need to know from the global musculoskeletal healthcare company's Q1 update.
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By the numbers
Zimmer Biomet announced Q1 revenue of $1.98 billion, a 2% decrease from the $2.02 billion reported in the same quarter of the previous year. The company's reported revenue was slightly higher than the average analysts' revenue estimate of $1.96 billion.
The company's GAAP net income in the first quarter was $246 million, or $1.20 per share. This was a 41% improvement of Zimmer Biomet's result in the prior-year period, when the company announced GAAP net income of $175 million, or $0.85 per share.
The company announced adjusted earnings of $384 million, or $1.87 per share, in the first quarter. This represented a 2% decrease from $391 million, or $1.91 per share, reported in the same quarter of 2018. Analysts were expecting Q1 adjusted earnings of $1.86 per share.
Behind the numbers
Zimmer Biomet CEO Bryan Hanson pointed to "overall strong performance in the Asia Pacific and Europe, Middle East and Africa (EMEA) regions." But revenue actually declined year over year in the EMEA region.
Why did Hanson express an optimistic view? He focused on Zimmer Biomet's results on a constant-currency basis. Adjusted for the fluctuations in currency, both Asia Pacific and EMEA regions enjoyed solid revenue growth.
The reality, though, was that none of Zimmer Biomet's product categories performed exceptionally well. Even on a constant-currency basis, revenue for the company's knee products increased only 0.5% year over year. Its hip products and S.E.T. (surgical, sports medicine, extremities, and trauma) products sales grew by 1.7%.
Zimmer Biomet did a good job controlling spending in the first quarter. Its total operating expenses decreased by 5% from the prior-year period to $1.63 billion.
Looking ahead
Zimmer Biomet's guidance from its previous update in February is unchanged. The company still anticipates full-year 2019 sales to be from 0.5% lower than the previous year to 0.5% higher. The company also projected 2019 diluted earnings per share (EPS) to be between $7.70 and $7.90.
The company is still working to turn things around. Hanson said that management remains confident in its progress. Investors should watch to see how Zimmer Biomet's recently launched products perform to gauge how the turnaround is going. The impact of these launches will most likely be seen in the second half of the year.
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