All you have to do to understand how the COVID-19 pandemic has impacted Zimmer Biomet Holdings (ZBH 0.22%) business is to look at its stock chart. The musculoskeletal healthcare company's shares plunged nearly 50% earlier this year and still have completely recovered.
Zimmer Biomet announced its third-quarter results before the market opened on Friday. And it looks like its business is bouncing back better than expected. Here are the highlights from Zimmer’s Q3 update.
Hip replacement implant. Image source: Getty Images.
By the numbers
Zimmer Biomet reported revenue in the third quarter of $1.93 billion, up 2% year over year. This result also easily topped the Wall Street consensus revenue estimate of $1.71 billion.
The company announced Q3 net income of $242.5 million, or $1.16 per share, based on generally accepted accounting principles (GAAP). This represented a sharp decline from Zimmer Biomet's GAAP earnings of $431.1 million, or $2.08 per share, generated in the same quarter of 2019.
However, it was a better story for the company's non-GAAP bottom line. Zimmer Biomet recorded adjusted non-GAAP earnings of $376.8 million, or $1.81 per share, up from non-GAAP earnings of $366.4 million, or $1.77 per share, in the prior-year period. This also blew past the average analysts' adjusted earnings estimate of $1.07 per share.
Behind the numbers
The good news for Zimmer Biomet was that its recovery from the COVID-19 pandemic continued in Q3. The company performed the strongest in the Americas, with revenue in the region rising 3.2% year over year to $1.22 billion. Sales in the Asia Pacific region increased by 2.3% year over year to $346.6 million, although foreign exchange fluctuations offset much of the gain.
Zimmer Biomet's main trouble spot was in its Europe, Middle East, and Africa (EMEA) region. Revenue in this region slipped 2.3% year over year to $366.2 million. The decline was even worse on a constant-currency basis -- 5.7%.
The company especially enjoyed solid growth with its hip implant business in the Americas, with revenue jumping 7.9% year over year to $268.6 million. Its dental, spine, craniomaxillofacial, and thoracic devices business also performed very well, with sales rising 7.3% to $295.5 million.
Zimmer Biomet's big year-over-year decline in GAAP earnings primarily stemmed from a tax benefit of $247.4 million in the prior-year period. The company's non-GAAP earnings excluded this tax benefit.
Looking ahead
Is the healthcare stock now poised for a stronger rebound after its Q3 results? That remains to be seen.
Zimmer Biomet CEO Bryan Hanson stated, "It is important to note that the challenges and fluidity around COVID-19 persist as we move into the end of the year." The company mentioned in its Q3 results press release that "the pace of procedure volume and patient returns slowed toward the end of the period, with overall performance still negatively impacted by the pandemic."
Some investors will likely be cautious about buying shares of Zimmer Biomet with COVID-19 cases rising in the U.S. and in other countries. Until the situation improves, the stock is likely to be volatile.
