Episode Details

Zimmer Biomet Holdings, Inc. (ZBH) Q2 2026 — Q2 2026 (three months ended June 30): net sales $2,177.0M, +4.8% reported / +4.0% ORGANIC constant currency, vs a $2,134.8M consensus. Adjusted diluted EPS $2.07 vs a $2.01 bar - but FLAT year over year. GAAP diluted EPS $1.03. Adjusted net earnings FELL 2.8% to $399.6M and adjusted operating profit FELL 3.2%. FY2026 guidance RAISED to $8.47-$8.59. The 8-K was accepted 6:30am ET Wednesday Aug 5, before the open: the stock opened $101.00, closed $98.16, and was back to $96.55 by Friday. Zimmer Biomet beat the adjusted earnings bar by six cents, raised full-year guidance, and gapped from $95.81 to open at $101.00. Three sessions later it was back at $96.55 - the entire gap given back while six separate desks raised their price targets. Here is what the tape saw. Adjusted net earnings FELL from $411.2M to $399.6M, down 2.8%, on revenue that grew 4.8%. Adjusted operating profit fell 3.2%. Adjusted gross margin fell 120bps. Adjusted EPS was flat at $2.07 only because 5.5 million shares are no longer there: $399.6M over LAST year's 198.3M diluted shares is $2.02, and the bar was $2.01 - in line, not a beat. And Knees, 38% of the company, grew 0.1% in constant currency while Stryker's knees grew 8.0%. THE CALL: HOLD (3/5, FAIR VALUE $96 vs THE $96.55 CLOSE - PRICED CORRECTLY, AND THE DISCOUNT TO STRYKER IS EARNED) — base-case value ~$96.0 vs ~$96.55 today. KEY METRICS: - CALL: HOLD 3/5, fair value $96 vs the $96.55 Aug 7 close = effectively LEVEL. Bull $136, bear $62. Buy under $82. EV $25.68B = 11.1x trailing EBITDA of $2.31B, the SAME multiple as Smith & Nephew and half of Stryker's 21.0x. Net debt/EBITDA 3.1x. FY26E FCF $1.29B, a 6.9% yield. - Street: Hold. S&P Global 27 analysts (9 buy / 18 hold / 0 sell), avg target $106.76 (Aug 6); Benzinga 23 analysts, avg $103.53. After the print: six target RAISES and ZERO rating changes - TD Cowen $115, Stifel $110, RBC $110, Truist $106 from $92 and KEPT A HOLD. What to watch: UP: net sales $2,177.0M, +4.8% reported and +4.0% organic constant currency, ahead of a $2,134.8M bar; adjusted diluted EPS $2.07 vs $2.01; GAAP diluted EPS $1.03, +33.8%; FY2026 guidance RAISED on revenue (3.9-4.9% reported, 2.25-3.25% organic cc) and adjusted EPS ($8.47-$8.59 from $8.40-$8.55); free cash flow $308.3M, +24%, with FY26 FCF guided +9-11%; Hips +5.1% cc; Technology, Data, Bone Cement and Surgical +21.5% cc with US technology sales +53%; $500.8M of stock repurchased in H1 and the FY26 buyback raised to $1.0B; 11.1x EV/EBITDA and a 6.9% free cash flow yield against Stryker at 21.0x. DOWN: adjusted net earnings FELL 2.8% to $399.6M and adjusted operating profit FELL 3.2% to $559.7M on 4.8% revenue growth; adjusted gross margin -120bps to 71.1% and adjusted operating margin -210bps to 25.7%; SG&A +10.4% to $899.3M, a 209bp deterioration, while R&D was CUT 7.5%; hold the share count at last year's 198.3M and adjusted EPS is $2.02 against a $2.01 bar - in line, not a six-cent beat; Knees, 38% of revenue, grew 0.1% cc while Stryker's knees grew 8.0%; the FY26 guidance raise of ~5.5 cents is roughly the size of the Q2 beat itself; net debt $7,069M with goodwill and intangibles at 114% of equity, so tangible book is negative; FY2025 free cash flow was only 0.72x adjusted net earnings; and the transformation is being run by an interim CFO. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.