All you have to do to understand how the coronavirus pandemic has impacted Zimmer Biomet Holdings (NYSE:ZBH) is to look at its stock chart. The musculoskeletal healthcare company's shares plunged nearly 50% earlier this year and still haven't 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 the quarterly update.
By the numbers
Revenue in the third quarter was $1.93 billion, up 2% year over year. This easily topped the Wall Street consensus revenue estimate of $1.71 billion.
The company announced third-quarter 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, in the year-ago quarter.
However, it was a better story for the company's adjusted bottom line. Zimmer Biomet recorded adjusted earnings of $376.8 million, or $1.81 per share, up from $366.4 million, or $1.77 per share, in the prior-year period. This result also zoomed 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 pandemic continued in the third quarter. 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, where revenue slipped 2.3% year over year to $366.2 million. The decline was even worse on a constant-currency basis: 5.7%.
The company had especially solid growth with its hip implant business in the Americas, with revenue jumping 7.9% year over year to $268.6 million. Its business with dental, spine, craniomaxillofacial, and thoracic devices 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 adjusted earnings excluded this tax benefit.
Is the healthcare stock now poised for a stronger rebound after its third-quarter results? That remains to be seen.
CEO Bryan Hanson said, "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 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.