Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Organic sales growth | 7.7% | Not stated |
| Adjusted EPS | $3.52 | Up 10.3% |
| Adjusted gross margin | 65.4% | Up 40 basis points |
| Adjusted operating margin | 26.2% | Up 60 basis points |
| U.S. Hips organic sales | -0.6% | Not stated |
Guidance and outlook
- Full year organic net sales growth of 6.5% to 7%.
- Full year adjusted net earnings per share of $14.80 to $14.90.
- Full year effective tax rate in the range of 15.5% to 16%.
- Full year adjusted other income and expense of approximately $400 million.
How management sounded
Balanced (+3 on our -10 to +10 scale). Management acknowledged a market slowdown in hips and knees, operational distractions from an SAP implementation, and lowered full-year guidance. Management sounded more upbeat than on 1% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
Hip and Knee Market Slowdown
Asked: Analysts asked about the market slowdown and if it was a short-term blip.
Answer: Management noted a market slowdown in the 2.5% range and attributed it to economic pressures on patients, though they could not predict a quick snapback.
CMR Surgical Investment
Asked: Analysts asked why CMR was the right partner and why not acquire it outright.
Answer: Management stated the soft tissue robotic market is appealing, but an outright purchase carries high risk and development costs, so they are starting as an investor to derisk.
Capital Allocation
Asked: Analysts asked about the philosophy behind the recent share buybacks.
Answer: Management explained that buybacks are opportunistic given the timing of M&A deal flow, but M&A remains the primary priority for capital allocation.
Cyber Incident and SAP
Asked: Analysts asked about the impact of the cyber incident and SAP implementation on performance.
Answer: Management noted these events caused distractions and delayed order entry, but they expect to move past these operational challenges.
What to watch before the next call
- Recovery of the hip and knee market procedure volumes.
- Progress on the commercialization of the CMR Surgical Versius platform in the U.S.
- Integration of the Ziva acquisition and the impact of new product launches like the hip impactor.
