Zimmer Biomet Q2 Earnings Call Highlights

Key Points

• Zimmer Biomet reported solid Q2 growth: Net sales rose 4.8% to $2.177 billion, driven by hips, specialty businesses and technology. Adjusted EPS was $2.07, while U.S. organic sales increased 4.6%.
• Technology and hip products led performance: Hip sales grew 5.1%, while technology, data, bone cement and surgical sales surged 21.5%, supported by strong ROSA, TMINI and OrthoGrid adoption. Knee sales were nearly flat, with international weakness—especially in China—offsetting U.S. gains.
• Zimmer Biomet raised its 2026 outlook: Organic sales growth is now expected at 2.25% to 3.25%, and adjusted EPS guidance increased to $8.47-$8.59. The company also plans up to $1 billion in share repurchases this year, despite margin pressure from costs and investments in its U.S. sales organization.

Zimmer Biomet NYSE: ZBH reported second-quarter 2026 net sales of $2.177 billion, up 4.8% on a reported basis and 4.0% on an organic constant-currency basis, as growth in hips, specialty businesses and technology helped offset weaker performance in certain other product lines.

U.S. organic constant-currency sales rose 4.6%, while international sales increased 3.1%. Chairman, President and CEO Ivan Tornos said the U.S. result reflected progress in the company’s sales-force transformation, product launches and commercial execution.

GAAP diluted earnings per share increased to $1.03 from $0.77 a year earlier. Adjusted EPS was $2.07, unchanged from the prior-year quarter. Interim CFO Paul Stellato said higher revenue and a lower share count were offset by expected dilution from the Paragon 28 acquisition and investments in the U.S. commercial organization.

Hips, Technology Drive Growth

Hip sales grew 5.1% on a constant-currency basis, including 5.9% growth in the United States and 4.2% internationally. Tornos attributed U.S. hip performance to adoption of the company’s “triple play” offering: the Z1 Triple Taper Hip Stem, the HAMMR surgical impactor and OrthoGrid navigation technology for direct anterior hip procedures.

Z1 now accounts for more than 40% of Zimmer Biomet’s U.S. hip systems, according to Tornos, while HAMMR was used in more than 25% of U.S. primary hip cases. OrthoGrid recorded its strongest quarter to date, with first-half case volume matching its full-year 2025 level.

In Japan, the company said demand for its iodine-coated hip technology exceeded expectations. Tornos said the product is intended to address the risk of periprosthetic joint infection after joint replacement and is drawing interest from existing customers as well as competitive accounts. He said Zimmer Biomet is pursuing pathways to bring the technology to additional countries, including discussions with the Food and Drug Administration regarding a potential U.S. path.

Knee sales increased 0.1% during the quarter. U.S. knee growth of 1.4% was partly offset by a 1.5% international decline, which management said was heavily affected by China and core emerging markets.

The company’s sports, extremities and trauma, or S.E.T., business grew 3.4% organically on a constant-currency basis, accelerating 180 basis points from the first quarter. U.S. S.E.T. sales rose at a mid-single-digit rate, while Paragon 28 sales increased in the mid-teens. Craniomaxillofacial and thoracic sales grew at a double-digit rate, and upper-extremity sales increased at an upper-single-digit rate. Those gains were partly offset by continued pressure in trauma and restorative therapies.

Technology and data, bone cement and surgical sales grew 21.5%. Tornos said U.S. technology sales rose more than 50%, supported by record capital sales of ROSA with OptimiZe and TMINI systems as well as an early contribution from the next-generation ROSA Shoulder launch. He said the robotic shoulder system can be used in both anatomic and reverse shoulder procedures.

Margins, Cash Flow and Capital Returns

Pricing was an 80-basis-point headwind in the quarter, within the company’s full-year expectation of up to 100 basis points of pricing pressure. Adjusted gross margin declined 120 basis points year over year to 71.1%, reflecting higher manufacturing costs, partly offset by geographic and product mix. Adjusted operating margin fell 210 basis points to 25.7% as Zimmer Biomet continued investing in its U.S. sales channel.

Operating cash flow totaled $448 million, up 18% from the prior year, while free cash flow rose 24% to $308 million. The company ended the quarter with about $410 million in cash and cash equivalents.

Zimmer Biomet repurchased $500 million of stock in the first half, including $250 million in the second quarter. It now plans to repurchase up to $1 billion of shares during 2026, $250 million above its prior expectation.

Full-Year Outlook Raised

Management raised its outlook for 2026 organic constant-currency revenue growth to 2.25% to 3.25%, from prior guidance of 1% to 3%. Reported sales growth is now expected to be 3.9% to 4.9%, compared with the previous 2.5% to 4.5% range.

The company continues to expect foreign exchange to provide an approximately 50-basis-point benefit to full-year sales growth, though it expects currency to be a 50-basis-point headwind in the third quarter. Paragon 28 is expected to contribute 110 basis points to reported sales growth for the year, above the prior expectation of about 100 basis points.

Zimmer Biomet raised adjusted EPS guidance to $8.47 to $8.59, from $8.40 to $8.55. It maintained expectations for gross margin of about 71%, net interest and other non-operating expense of $295 million, an 18% adjusted tax rate and free-cash-flow growth of 9% to 11%.

Sales Transformation and Longer-Term Strategy

Tornos said the company’s move toward a dedicated, specialized U.S. sales organization is progressing with less customer disruption and sales-force turnover than initially expected. Zimmer Biomet expects to complete the transformation by the end of 2027. The company has added, or is in the process of adding, 200 technical representatives and has increased investments in retention, compensation and sales-excellence initiatives.

Management also outlined operational initiatives including shifting some research-and-development activity to a global capability center in India, constructing a manufacturing facility in Costa Rica and applying artificial intelligence to operating expenses.

Looking ahead, Tornos said Zimmer Biomet expects to introduce more than 50 products over the next 36 months and plans to continue evaluating acquisitions in higher-growth reconstruction, S.E.T. and adjacent markets. The company aims to reach a weighted average market growth rate of 5% to 6% by the end of the decade.

About Zimmer Biomet (NYSE:ZBH)

Zimmer Biomet NYSE: ZBH is a global medical device company focused on musculoskeletal healthcare. Headquartered in Warsaw, Indiana, the company designs, manufactures and markets a broad portfolio of products used to treat joint disorders, bone disorders and related conditions. Its customer base includes orthopaedic and dental surgeons, hospitals, ambulatory surgery centers and other healthcare providers that rely on implants, instruments and related services for reconstructive and restorative procedures.

The company's product offerings span joint replacement systems for hips, knees and shoulders; trauma and extremities implants; spine and thoracic solutions; dental and craniomaxillofacial implants and prosthetics; and sports medicine devices.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source