Why Zimmer Biomet Is Stumbling 13.7% Today

By Markets Fool.com

Image source: Getty Images.

Continue Reading Below

What happened

After reporting third-quarter financial results and lowering its forecast growth for this year, shares in Zimmer Biomet (NYSE: ZBH) are falling 13.7% today at 1:45 p.m. EST.

So what

The global maker of musculoskeletal healthcare products, including knee and hip reconstructive products, posted third-quarter sales of $1.833 billion, up 4% year over year. Adjusted EPS increased 9.1% year over year to $1.79.

Revenue in Asia Pacific jumped 13.6% to $288.1 million, while sales in EMEA fell 1.7% to $368.8 million. In the Americas, where the company generates the bulk of its sales, revenue was up 3.7% to $1.176 billion.

Continue Reading Below

The results were mostly in line (a small miss on the top line versus consensus estimates), so today's sell-off likely stems from management lowering its revenue growth forecast for this year. Management now expects revenue growth (excluding the recent acquisition of LDR Holding Corporation) of between 1.65% and 1.90%, down from previous estimates for between 2.5% and 3% growth. Management also slightly reduced the top end of its full-year adjusted EPS guidance to $7.95 from $8.00 previously.

Now what

A larger, older, and longer-living global population provides natural tailwinds that support demand for procedures such as hip and knee replacements, so investors might not want to focus too much attention on the more conservative short-term outlook.

It's encouraging to me that growth remains strong in markets like China; however, the European weakness should be watched closely to see if it accelerates.

Investors will also want to keep an eye on the company next year to see if it can capture the benefits it expects from its recently completedacquisition of LDR Holding Corporation, a maker of spine products. LDR Holding Company is a leader in cervical disk replacement products, and while the acquisition isn't providing a bottom-line boost this year, management does expect the deal to be accretive in 2017.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early, in-the-know investors! To be one of them, just click here.

Todd Campbell has no position in any stocks mentioned.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.Like this article? Follow him onTwitter where he goes by the handle @ebcapitalto see more articles like this.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.