Zimmer Biomet Holdings Inc (ZBH) (Q3 2026) Earnings Call Highlights: Guidance Raised as Hips, S. ...

Negative Points

• Zimmer Biomet Holdings Inc ( NYSE:ZBH )'s knee business declined 2.6% on a constant currency basis, with US knees down 2% and international knees down 3.4%, due to sales force transition and competitive pressure.

• China headwinds are expected to impact Q4 growth by nearly 100 basis points and full-year 2026 growth by roughly 50 basis points, with the distributor network consolidation anniversarying in January 2027.

• Adjusted operating margin declined 140 basis points year-over-year to 25.1%, reflecting continued investments in the US commercial organization and higher manufacturing costs.

• Adjusted gross margin decreased 90 basis points year-over-year to 71.7%, primarily due to higher manufacturing costs, partially offset by product mix benefits.

• Zimmer Biomet Holdings Inc ( NYSE:ZBH ) faces ongoing risk from the US sales force disruption, with the third and riskiest stage of the go-to-market transformation currently underway, making it difficult to quantify the net impact on 2027.

Q & A Highlights

Q: With two-thirds of the portfolio growing at upper-single-digit or double-digit rates, are the strong growth rates in hips and S.E.T. sustainable, and what is the path to get knees back to market growth? A: CEO Ivan Tornos said the company is no longer primarily a reconstructive business global knees (NIS) are now roughly one-third of the book and U.S. knees about 20%, while S.E.T. and technology have been built into a world-class portfolio (foot and ankle growing ~18%, technology ~20%-30%). He believes upper-single-digit/double-digit growth in these areas is sustainable given market growth and innovation, though he won't commit to that pace every quarter. On knees, he acknowledged dissatisfaction with U.S. performance but called it expected and execution-driven, citing go-to-market changes (incentive plans, leadership, converting independent reps to direct) and innovation (T-mini extension, ROSA OptimiZe, Monogram 510(k)). Global knees excluding China would have been flat.

Q: A major competitor flagged slower procedural growth, higher insurance premiums and deductibles, and increased prior-authorization denials. How does Zimmer Biomet view the recon market, and how is that factored into guidance? A: CEO Ivan Tornos said the company doesn't declare a market slowdown based on one or two quarters. He pointed to 7% global hip growth (5.8% U.S.), double-digit growth in several S.E.T. categories, steady cancellation rates, and pricing performance that improved sequentially as evidence the market remains healthy. He noted another competitor is growing 3%-4% in U.S. knees. Zimmer Biomet models recon market growth of ~4%-4.25% globally and 2.5%-3.5% in the U.S., and sees double-digit growth in the ASC setting. He attributed the company's knee underperformance to commercial execution, not market deterioration.

Q: Monogram is coming earlier than expected. What is the go-to-market strategy, initial rollout pace, and value proposition for surgeons? A: CEO Ivan Tornos said the 510(k) submission is expected "very soon" and that clinical work allows the company to leap directly to a fully autonomous indication rather than a semi-autonomous step. He highlighted five claims: safety (zero patient safety reports in trials, smart surgical boundaries), efficiency (fast registration and bone preparation, targeting time neutrality versus conventional), ease of use (no need to rethink surgical algorithms), reproducibility, and accuracy. He sees a "blue ocean" opportunity given ~80% of U.S. surgeons and ~90% outside the U.S. don't use robotics, plus a second opportunity converting competitor accounts and a third, smaller segment of ROSA users.

Q: 2026 guidance implies ~3.25% organic growth at the midpoint including China and sales force transition headwinds. Why wouldn't 2027 be better, and what variables should investors watch? A: CEO Ivan Tornos said 2027 should be a better year than 2026, citing three obvious factors: China headwinds (2% of revenue, 1% of EBITDA) anniversary in January 2027 after costing ~100 basis points in Q3 and Q4 and ~50 basis points for the full year 2026; Monogram as a catalyst pending approval; and Paragon 28 contributing a full year of organic growth (~20%) versus only a couple of quarters in 2026. He also expects benefits from the U.S. go-to-market changes, while acknowledging there will be headwinds discussed in early 2027. He reiterated a measured guidance philosophy: "say less and do more."

Q: Reaching the 6% weighted average market growth aspiration by the end of the decade likely requires M&A. How is the M&A environment, willingness to take dilution, and ability to drive EPS leverage next year? A: CEO Ivan Tornos said the 6% WAMGR doesn't require purely inorganic action: R&D has been reshuffled so 85%-90% of spend targets markets growing above 5%-6%, plus the Deerfield/HSS partnership ($300 million over 8 years) and a new strategic venture platform. Still, responsible M&A is part of the equation, funded by operating cash flow near $2 billion and free cash flow near $1.3 billion (conversion north of 100% in the quarter, 77% year-to-date). Priorities are high-growth recon segments, high-growth S.E.T. areas, and adjacencies like ASCs, with deals ideally up to ~$2 billion, immediately revenue-accretive, EPS-accretive by year two, and double-digit ROIC by year five, using Paragon 28 as the blueprint. He deferred EPS leverage specifics to early 2027 guidance.

Q: How have U.S. healthcare cuts (Medicaid, ACA subsidies) impacted end markets, where does weighted average end market growth stand, and how would a reversal change things? A: CEO Ivan Tornos said it's too early to discuss potential legislative reversals. He reiterated a validated global WAMGR of ~4%-4.25%, similar in the U.S., even under a bear case where U.S. recon grows toward 2.5%. He said ACA subsidies have not had a material impact, noting the average procedure patient is 64-65 years old and thus Medicare-covered, with Medicare reimbursement expected to rise in early 2027, healthy DRGs, and implant price as a percentage of DRG at an all-time low.

Q: How is media speculation about private equity interest in ortho businesses affecting Zimmer Biomet and its employees, and how is the company thinking about strategic options? A: CEO Ivan Tornos declined to comment on speculation about deals elsewhere, saying employees are laser-focused on driving growth. He cited two-thirds of the business growing upper-single-digit/double-digit, U.S. growth approaching 4% (3.8% year-to-date), single-digit U.S. turnover, and a channel transformation progressing better than expected. He said the company will leverage disruption in other pockets of med tech where possible and continues hiring talent from great companies, while staying focused on innovation and commercial execution.

Q: Longer term, what share could Monogram drive for Zimmer Biomet, and how does it complement the broader robotics strategy? A: CEO Ivan Tornos called Monogram a major catalyst, pointing to the ~90% of surgeons outside the U.S. and ~80% in the U.S. who don't use robotics as a large untapped opportunity, plus the chance to convert competitor accounts

For the complete transcript of the earnings call, please refer to the full earnings call transcript .