Shares of Zimmer Biomet Holdings Inc. (ZBH) declined approximately 9% on Tuesday, even after the orthopedic device maker reported first-quarter results that exceeded Wall Street expectations and raised its full-year profit forecast. The stock traded at $84.17 in late morning trading, as market participants weighed a steady sales outlook, the departure of the chief financial officer, and ongoing disruptions from a restructuring of the U.S. sales force.
Quarterly Performance and Guidance
The company reported net sales of $2.087 billion for the first quarter, representing a 9.3% increase compared to the same period last year. Adjusted earnings per share came in at $2.09, surpassing analyst estimates. On a GAAP basis, diluted EPS jumped 34.1% to $1.22. Zimmer Biomet raised its adjusted EPS forecast for 2026 to a range of $8.40 to $8.55, up from the prior range of $8.30 to $8.45.
However, the company left its full-year organic constant-currency revenue growth outlook unchanged at 1% to 3%. This metric excludes currency fluctuations and, for part of the year, the impact of the Paragon 28 acquisition. The unchanged sales forecast, despite the strong quarter, appeared to disappoint investors who had hoped for an upward revision.
Sales Force Restructuring and Challenges
CEO Ivan Tornos acknowledged that the quarter included headwinds from the ongoing overhaul of the U.S. sales force. He noted that the transition led to the loss of two major customer accounts, and U.S. knee growth fell short of internal targets. “This is a year of transition,” Tornos said during an analyst call. The company has been shifting to a model with a higher proportion of specialized representatives and a lower reliance on 1099 contractors. As of the end of the quarter, just under 60% of the U.S. sales team operated as contractors, down from roughly two-thirds at the start of the year. The share of specialized reps increased to around 30%.
CFO Departure and Market Reaction
Zimmer Biomet announced that CFO Suketu Upadhyay will step down effective April 28 to pursue a new role at biopharmaceutical firm Incyte. Paul Stellato, the company's controller and chief accounting officer, will serve as interim CFO while the company conducts a search for a permanent replacement, both internally and externally. According to a securities filing, Upadhyay's departure was not related to any disagreements over financial reporting, internal controls, or operations. Analysts at Stifel characterized the management change as unremarkable, noting that Upadhyay leaves the company with solid finances and operations.
External Factors and Cash Flow
Upadhyay noted that the raised profit forecast was partly aided by the end of U.S. tariffs, which added roughly 20 cents per share to earnings projections, with about half of that benefit expected in the second half of the year. The company also reported operating cash flow of $359.4 million and free cash flow of $245.9 million after capital expenditures.
Peer Comparison and Market Context
Zimmer Biomet underperformed its medtech peers on the day. Stryker Corp., a larger orthopedic competitor, slipped about 1.6% in late morning trading. Medtronic edged down 0.7%, while Johnson & Johnson's medtech division helped lift its stock by about 2.1%. The broader market showed mixed performance, with the S&P 500 healthcare sector index (XLV) trading relatively flat.
Risks and Outlook
The company cautioned that its sales force overhaul could take longer or result in greater business disruption than currently anticipated, particularly in the U.S. knees segment. Additionally, Zimmer is still completing a fair-value review related to goodwill, and first-quarter GAAP net earnings could be affected if an impairment charge is recorded. Despite these uncertainties, management expressed confidence in the company's long-term prospects, citing healthy end markets and strong demand for its latest knee and hip replacement products.