Medical device company Zimmer Biomet (NYSE: ZBH) announced better-than-expected revenue in Q1 CY2025, with sales up 1.1% year on year to $1.91 billion. Its non-GAAP profit of $1.81 per share was 2.3% above analysts’ consensus estimates.
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Zimmer Biomet (ZBH) Q1 CY2025 Highlights:
- Revenue: $1.91 billion vs analyst estimates of $1.89 billion (1.1% year-on-year growth, 0.7% beat)
- Adjusted EPS: $1.81 vs analyst estimates of $1.77 (2.3% beat)
- Adjusted EBITDA: $566.3 million vs analyst estimates of $603.5 million (29.7% margin, 6.2% miss)
- Management lowered its full-year Adjusted EPS guidance to $8 at the midpoint, a 3% decrease
- Operating Margin: 15.3%, up from 14.1% in the same quarter last year
- Free Cash Flow Margin: 17.7%, up from 4.8% in the same quarter last year
- Constant Currency Revenue rose 2.3% year on year (4.4% in the same quarter last year)
- Market Capitalization: $20.25 billion
"We are proud of our team's continued execution and performance to start the year, as we delivered solid first quarter results and advanced our bold innovation agenda," said Ivan Tornos, Zimmer Biomet's President and Chief Executive Officer.
Company Overview
With a history dating back to 1927 and a presence in over 100 countries worldwide, Zimmer Biomet (NYSE: ZBH) designs and manufactures orthopedic products including knee and hip replacements, surgical tools, and robotic technologies for joint reconstruction and spine surgeries.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Zimmer Biomet struggled to consistently increase demand as its $7.70 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Zimmer Biomet’s annualized revenue growth of 4.1% over the last two years is above its five-year trend, but we were still disappointed by the results. 
Zimmer Biomet also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 4.8% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Zimmer Biomet has properly hedged its foreign currency exposure. 
This quarter, Zimmer Biomet reported modest year-on-year revenue growth of 1.1% but beat Wall Street’s estimates by 0.7%.
Looking ahead, sell-side analysts expect revenue to grow 3.9% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its newer products and services will not accelerate its top-line performance yet.
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Operating Margin
Zimmer Biomet has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 13.5%, higher than the broader healthcare sector.
Analyzing the trend in its profitability, Zimmer Biomet’s operating margin rose by 6.9 percentage points over the last five years. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 5.4 percentage points on a two-year basis.
In Q1, Zimmer Biomet generated an operating profit margin of 15.3%, up 1.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Zimmer Biomet’s EPS grew at an unimpressive 3.5% compounded annual growth rate over the last five years. On the bright side, this performance was better than its flat revenue and tells us management responded to softer demand by adapting its cost structure.
Diving into the nuances of Zimmer Biomet’s earnings can give us a better understanding of its performance. As we mentioned earlier, Zimmer Biomet’s operating margin expanded by 6.9 percentage points over the last five years. On top of that, its share count shrank by 3.3%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
In Q1, Zimmer Biomet reported EPS at $1.81, down from $1.94 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 2.3%. Over the next 12 months, Wall Street expects Zimmer Biomet’s full-year EPS of $7.87 to grow 7.1%.
Key Takeaways from Zimmer Biomet’s Q1 Results
It was good to see Zimmer Biomet narrowly top analysts’ revenue and EPS expectations this quarter. On the other hand, it lowered its full-year EPS guidance. Overall, this was a softer quarter, but the stock traded up 2.4% to $104.88 immediately following the results.
So should you invest in Zimmer Biomet right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
