Analyst Note
| Debbie Wang |Wide-moat Zimmer Biomet delivered first-quarter results that exceeded most expectations, especially on the top line, and we've slightly dialed up our projections for the full year following this strength. However, these adjustments weren't enough to materially shift our fair value estimate, especially as the firm's first-quarter costs tracked closely along with our expectations. Zimmer Biomet's quarterly revenue growth of 13% (in constant currency) was within spitting distance of Stryker's 14% year-over-year growth. Similar to the cardiac device makers, most of the large orthopedic implant competitors received a boost from the comparison with a soft prior-year period. But even after accounting for that, the device makers saw robust quarterly growth thanks to increased medical utilization, easing labor conditions at providers, and improving access to component parts. Though we think it's unlikely that Zimmer Biomet can maintain this 13% growth through the full year, the strong start does suggest our original low-single-digit revenue growth assumption in 2023 was likely too low. We now estimate full-year sales growth should fall closer to 4.7%, after adjusting for foreign exchange headwinds.