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Zimmer Biomet Holdings Inc. (ZBH), Large Cap AI Study of the Week

Zimmer Biomet Holdings Inc. (ZBH), Large Cap AI Study of the Week

October 1, 2024

Weekly AI Pick from the S&P 500

Company Overview

Zimmer Biomet Holdings, Inc. is a global leader in medical technology, focusing on enhancing mobility and health through a diverse product portfolio. The company's offerings include orthopedic reconstructive items, sports medicine and biologics products, extremities and trauma solutions, craniomaxillofacial and thoracic products, and advanced surgical instruments. They also utilize integrated digital and robotic technologies, leveraging data analytics and AI. Following the acquisition of Biomet, Inc. in 2015 and the spinoff of its spine and dental businesses into ZimVie Inc. in 2022, Zimmer Biomet has honed its focus on orthopedic solutions. The company serves orthopedic surgeons and healthcare institutions globally through direct sales and distributors, with a notable portion of sales coming from consignment arrangements. Zimmer Biomet operates internationally across the Americas, EMEA, and Asia Pacific regions, supported by a highly trained sales force and a comprehensive distribution network.

The company's key product categories include knee and hip replacement systems, sports medicine, biologics, trauma, foot and ankle, and upper extremities products, along with innovative surgical and robotic technologies like the ROSA® Robot and ZBEdge™ Platform. Their research and development efforts are concentrated on advancing robotic techniques, materials, biologics, and data solutions, with new ventures into artificial intelligence and machine learning. Zimmer Biomet adheres to stringent global regulatory frameworks, including FDA regulations, ensuring compliance and safety of their medical devices. The company aims for sustainable growth through R&D, acquisitions, licensing, and strategic alliances. They face competition from major players such as DePuy Synthes, Stryker Corporation, and Smith & Nephew, with innovation, technology, and quality being critical competitive factors. Zimmer Biomet emphasizes diversity and inclusion, with specific representation goals for women and People of Color by 2026, and has committed $6 million to initiatives combating racism and promoting diversity. The company prioritizes employee engagement, health, safety, and wellness, maintaining low incident rates. Zimmer Biomet's leadership team boasts extensive experience in finance and operations, with key personnel having held significant roles in major corporations. Their Investor Relations website offers comprehensive updates on financial filings, corporate governance, and other essential information for investors.

By the Numbers

  • Annual Net Sales (2023): $7,394.2 million, a 6.5% increase from 2022.
  • Net Earnings from Continuing Operations (2023): $1,024.0 million, up from $290.2 million in 2022.
  • Sales Growth by Region (2023): U.S. sales up 6.9%, International sales up 6.1%.
  • Sales Growth by Product Category (2023): Knees up 9.4%, Hips up 3.8%, S.E.T. category overall growth with some decline in trauma sales.
  • Operating Expenses as Percentage of Net Sales (2023): Decreased for cost of products sold and SG&A, increased R&D expenses.
  • Other (Expense) Income, Net (2023): Reduced loss of $9.3 million, improved from a loss of $128 million in 2022.
  • Interest Expense on Rate Swaps (2023): Losses of $38.9 million, up from $4 million in 2022.
  • Effective Tax Rate (2023): Decreased to 4.0% from 27.9% in 2022.
  • Cash and Cash Equivalents (2023): $415.8 million.
  • Quarterly Dividends (2023): $0.24 per share.
  • Share Repurchase Program (2023): $1.0 billion program, $155.8 million still authorized; 0.5 million shares repurchased in early 2024 for $64.1 million.
  • Restructuring Plans (2023): Anticipated total pre-tax charges of $120 million to $370 million; projected gross annual pre-tax operating expense reductions of $175 million to $280 million by end of 2025.
  • Litigation-Related Liabilities (2023): $244.1 million as of December 31, 2023.
  • Net Sales Increase (Q2 2024): 3.9% for three months, 3.5% for six months.
  • Net Earnings (Q2 2024): $242.8 million for three months, $415.2 million for six months.
  • Foreign Currency Impact on Net Sales (Q2 2024): Negative impact of 1.7% for three months, 1.5% for six months.
  • Product Category Sales Growth (Q2 2024): Knees up 3.9%, S.E.T. up 6.1%, Other up 9.1%, Hips up 0.4%.
  • U.S. Net Sales Growth (Q2 2024): 3.5% for three months, 3.6% for six months.
  • International Net Sales Growth (Q2 2024): 4.4% for three months, 3.5% for six months.
  • Effective Tax Rate (Q2 2024): 19.6%, down from 24.2% and 21.5% in 2023.
  • Cash Flows from Operations (H1 2024): $597.4 million, down from $655.6 million in the previous year.
  • Cash Used in Investing Activities (H1 2024): $442.0 million.
  • Cash Outflows for Financing Activities (H1 2024): $142.0 million, down from $316.1 million in the previous year.
  • Cash and Cash Equivalents (H1 2024): $388.9 million held abroad.
  • New Share Repurchase Program (2024): $2.0 billion authorized, $1,697.6 million remaining as of August 2024.
  • Quarterly Dividend (2024): $0.24 per share.
  • Litigation-Related Liabilities (H1 2024): $208.2 million as of June 30, 2024.

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