Zimmer Biomet's Q1 2025 Results: Navigating Growth Amid Headwinds with Strategic Acquisitions and Innovation

Nathaniel StoneThursday, May 8, 2025 12:58 am ET
15min read

Zimmer Biomet Holdings, Inc. (ZBH) has reported its first-quarter 2025 earnings, offering a mixed but cautiously optimistic snapshot of the orthopedic leader’s performance. While net sales grew modestly, strategic moves—including the acquisition of Paragon 28 and new product launches—position the company to capitalize on long-term trends in musculoskeletal care. However, near-term challenges like tariffs and integration costs cloud the outlook, creating a nuanced picture for investors.

Financial Performance: Modest Growth with Structural Shifts

Zimmer Biomet’s Q1 2025 net sales rose 1.1% year-over-year to $1.909 billion, with constant currency growth of 2.3%, reflecting resilience in core markets. However, adjusted diluted EPS fell to $1.81 from the prior-year’s $1.94, signaling margin pressures. A closer look at the breakdown reveals opportunities and challenges:

  • U.S. Dominance: Domestic sales grew 1.3% to $1.114 billion, driven by strong performance in hips and S.E.T. (Sports Medicine, Extremities, Trauma). The Z1™ Hip System and HAMMR® Impactor demonstrated traction, while foot and ankle products fueled S.E.T.’s 3.9% sales growth.
  • International Volatility: International sales dipped 0.7% in reported terms but rose 3.7% on a constant currency basis. Currency adjustments masked weak performance in Europe, where regulatory and macroeconomic headwinds persist.

Strategic Leverage: Acquisitions and Innovation

The quarter’s standout move was the completion of the $1.8 billion Paragon 28 acquisition, which adds a 23% U.S. share in the foot and ankle segment. This move is critical: foot and ankle procedures are growing at ~8% annually, outpacing hip and knee replacements.

Product advancements also shone:
- The Persona® Revision SoluTion™ Femur, cleared by the FDA in Q1, targets patients avoiding metal-on-metal implants, a growing niche.
- The ZBX™ ASC Offering, designed for ambulatory surgery centers, reflects Zimmer Biomet’s push to streamline surgical workflows and reduce costs for healthcare providers.

Updated Guidance: Balancing Optimism and Realities

Management revised 2025 guidance to reflect Paragon’s inclusion and currency tailwinds:
- Revenue Growth: Raised to 5.7%–8.2% (including Paragon), with organic constant currency growth projected at 3.0%–5.0%.
- EPS: Lowered to $7.90–$8.10 due to integration costs and tariffs, particularly in China.

Risks and Considerations

Despite the strategic momentum, risks remain:
- Trade Tensions: U.S.-China tariffs continue to pressure margins, with Zimmer Biomet relying on Asian manufacturing.
- Regulatory Hurdles: EU Medical Device Regulation (MDR) compliance costs could strain profitability.
- Debt Levels: Total debt rose to $6.576 billion post-Paragon, raising questions about leverage and future flexibility.

Conclusion: A Long-Term Play with Near-Term Caution

Zimmer Biomet’s Q1 results underscore its dual identity: a steady operator in mature markets and an aggressive innovator in high-growth niches. The Paragon acquisition and product pipeline suggest sustainable organic growth potential, particularly in S.E.T. and foot/ankle segments.

However, investors must weigh this against near-term headwinds. The revised EPS guidance and elevated debt remind that execution risks—integration, tariffs, and regulatory costs—are material.

The Bottom Line: For long-term investors, Zimmer Biomet’s 10-year CAGR of ~3.5% in orthopedics and its leadership in robotic-assisted surgery (via partnerships like MAKO) make it a compelling play on aging populations and surgical advancements. Near-term turbulence may present buying opportunities, but patience is key.

As management navigates these challenges, the company’s ability to convert innovation into market share—and manage its debt—will determine whether Q1’s groundwork translates into sustained success.