It has been about a month since the last earnings report for Zimmer Biomet (ZBH). Shares have added about 1.8% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Zimmer due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.
ZBH Q2 Earnings & Revenues Top Estimates
Zimmer Biomet posted second-quarter 2026 adjusted earnings per share of $2.07, which beat the Zacks Consensus Estimate of $2.01 by 3%. The adjusted figure was unchanged year over year.
The quarter’s adjustments included intangible asset amortization, restructuring and other cost-reduction initiatives, inventory and manufacturing-related charges, acquisition and integration costs, litigation expenses and other charges.
GAAP earnings were $1.03 per share compared with 77 cents in the year-ago period.
Revenues
Net sales of $2.18 billion increased 4.8% year over year. The figure also surpassed the Zacks Consensus Estimate of $2.13 billion by 2.3%. Sales increased 4.7% on a constant-currency basis and 4% on an organic constant-currency basis. The organic measure excludes the impact of the Paragon 28 acquisition.
Revenues by Geography
Sales generated in the United States totaled $1.24 billion, up 5.6% year over year. International sales grossed $937 million, reflecting growth of 3.7% on a reported basis and 3.5% on a constant currency basis.
Segmental Analysis
The company currently reports under four product categories: Knees, Hips, S.E.T. and Technology & Data, Bone Cement and Surgical.
Sales in the Knees unit improved 0.4% year over year to $828.9 million. At constant exchange rate or CER, revenues increased 0.1%. U.S. Knees sales rose 1.4%, while international sales declined 0.9% on a reported basis and 1.5% at CER.
Hips sales increased 5% year over year to $562.7 million and rose 5.1% at CER. U.S. Hips revenues advanced 5.9%, while international sales grew 4% on a reported basis and 4.2% at CER.
Revenues in the S.E.T. unit rose 6.4% year over year to $586 million. Sales increased 6.2% at CER.
Technology & Data, Bone Cement and Surgical revenues surged 21.1% to $199.4 million. At CER, sales increased 21.5%, marking the strongest growth among Zimmer Biomet’s product categories.
Margin Performance
Adjusted gross margin, after excluding intangible asset amortization and inventory and manufacturing-related charges, was 71.1%. This compared with approximately 72.3% in the year-ago quarter. Cost of products sold, excluding intangible asset amortization, increased 7.3% to $635.5 million. Selling, general and administrative expenses rose 10.4% to $899.3 million, while research and development expenses declined 7.5% to $104.8 million.
Adjusted operating profit was $559.7 million compared with $578.5 million a year earlier. The adjusted operating margin contracted 210 basis points to 25.7%.
Cash Position
Zimmer Biomet exited the second quarter of 2026 with cash and cash equivalents of $410 million compared with $591.9 million at the end of 2025.
Net cash provided by operating activities was $447.9 million in the quarter compared with $378.2 million in the year-ago period. Free cash flow increased to $308.3 million from $247.7 million.
For the first six months of 2026, operating cash flow totaled $807.2 million. The company repurchased $500.8 million of common stock and paid $93.4 million in dividends during the period.
2026 Guidance Raised
Zimmer Biomet updated its financial guidance for 2026. Reported revenue growth is now expected in the range of 3.9-4.9%, up from the prior projection of 2.5-4.5%. Constant-currency revenue growth is projected between 3.4% and 4.4%, compared with the earlier range of 2-4%. Organic constant-currency growth is expected in the band of 2.25-3.25%, up from 1-3%.
Adjusted earnings for the full year are now expected in the range of $8.47-$8.59 per share. The previous guidance called for adjusted earnings of $8.40-$8.55.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Zimmer has a average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Zimmer has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Zimmer Biomet Holdings, Inc. (ZBH): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).