|Zimmer CEO David Dvorak|
Zimmer Biomet ($ZBH) is a done deal. On its first earnings call, the combined company made it clear that it's doing a good job at paring back--but the path to establishing vigorous sales growth remains unclear. The newly emerging orthopedics company expects that continued cuts, along with cross-sales opportunities to boost revenues, will lead the way into 2016.
The company gained more than 10% this week on earnings expectations. Zimmer Biomet boosted its 2015 adjusted EPS range to $6.83 to $6.87 from $6.65 to $6.80, but lowered its 2015 revenue growth guidance to 1% to 1.5% from a range of 1.5% to 2%.
As for 2016, Zimmer Biomet has said it expects to grow EPS by 15% to 20% off the previous EPS range of $6.65 to $6.80. CFO Dan Florin said the company will offer detailed 2016 guidance in January. He said he expects the cross-selling opportunity to be realized next year.
Florin said the company will achieve more synergy savings faster than it had previously anticipated. In the first 12 months, Zimmer Biomet expects $155 million in synergies up from the prior $135 million. But that doesn't change the three-year anticipated total of $350 million.
Zimmer and Biomet each had their own orthopedic portfolio with Zimmer's including orthopedic reconstructive, spinal and trauma devices, dental implants and related surgical products while Biomet's portfolio included hip and knee reconstructive products, sports medicine, extremities and trauma products, spine, bone healing and microfixation products, dental reconstructive products and cement, biologics.
But now, Zimmer Biomet is looking for sales growth from exposure of the combined customer base to each company's top products.
"Our sales growth continued to be led by Persona, the personalized knee system, and the clinically trusted Vanguard complete knee system, as well as our Vanguard 360 revision knee system. We also drove sales of our bicruciate preserving arthroplasty options, including the clinically proven Oxford Partial Knee and our new Vanguard XP Total Knee System," said Zimmer Biomet President and CEO David Dvorak on the earnings call.
"This positions us extraordinarily well to take advantage of the cross-sell opportunities, and so we expect to see a bit of that retrieved in the fourth quarter here, and then sequentially throughout 2016, more and more of that will be realized on the cross-sell opportunity. What we're forecasting really is stability, Bob, sequentially, from Q3 to Q4," he concluded.