ZBH's Q2 Earnings Beat, '26 View Raised, Stock Up in Pre-Market

GAAP earnings were $1.03 per share compared with 77 cents in the year-ago period.

ZBH's 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 2.25%.

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.

Following the earnings announcement, ZBH stock rose 1.4% in pre-market trading today.

ZBH's 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 of ZBH's Revenues

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.

Hipssales 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, comprising Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic, rose 6.4% year over year to $586 million. Sales increased 6.2% at CER.

Technology & Data, Bone Cement and Surgicalrevenues surged 21.1% to $199.4 million. At CER, sales increased 21.5%, marking the strongest growth among Zimmer Biomet’s product categories.

ZBH's 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%.

ZBH's 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.

ZBH's 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%. The Zacks Consensus Estimate for 2026 revenues is currently pegged at $8.53 billion.

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. The Zacks Consensus Estimate for 2026 adjusted earnings is currently pegged at $8.48 per share.

Our Take on ZBH

Zimmer Biomet exited the second quarter with better-than-expected earnings and revenues. Growth in Hips, S.E.T. and Technology & Data, Bone Cement and Surgical offset the modest performance of the Knees category.

The strong expansion in Technology & Data, Bone Cement and Surgical sales was encouraging. Higher operating cash flow and free cash flow also supported the quarterly performance.

However, the contraction in adjusted gross and operating margins remains a concern. Rising product costs and selling, general and administrative expenses weighed on profitability despite revenue growth.

ZBH’s Zacks Rank & Key Picks

Zimmer Biomet currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Intuitive Surgical ISRG, Quest Diagnostics DGX and Medpace MEDP.

Intuitive Surgical, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2026 adjusted EPS of $2.80, which surpassed the Zacks Consensus Estimate by 12.9%. Revenues of $2.89 billion beat the Zacks Consensus Estimate by 3.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ISRG has an earnings yield of 3.1% against the industry’s negative 3% yield. The company beat earnings estimates in each of the trailing four quarters, the average surprise being 16.53%.

Quest Diagnostics, carrying a Zacks Rank #2 at present, posted second-quarter 2026 adjusted EPS of $3.12, exceeding the Zacks Consensus Estimate by 11%. Revenues of $3.04 billion topped the Zacks Consensus Estimate by 2.1%.

DGX has an earnings yield of 4.7%, almost in line with the industry’s yield. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 5.77%.

Medpace, carrying a Zacks Rank #2 at present, posted second-quarter 2026 adjusted EPS of $4.25, exceeding the Zacks Consensus Estimate by 4.17%. Revenues of $707.3 million outperformed the consensus mark by 1.12%.

MEDP has a historical five-year earnings growth rate of 30.5% compared with the industry’s 5.6% growth. In the trailing four quarters, the company delivered an average earnings surprise of 10.16%.

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