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Zimmer Biomet (ZBH): Spine Group Solid, Q3 Results a Drag
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On Dec 19, we issued an updated research report on Warsaw, IN-based Zimmer Biomet Holdings Inc. (ZBH - Free Report) . It is a leading musculoskeletal healthcare company that designs and distributes orthopedic reconstructive products, spine, bone healing, thoracic products; dental implants; and related surgical products.
Over the past six months, Zimmer Biomet traded neck on neck with the Zacks categorized Medical Product industry. However, things took an adverse turn in late October with the company posting disappointing third-quarter 2016 results. The stock lost 19.1% over the past six months as compared to the broader industry’s decline of 8.7%.
Apart form the quarterly debacle, estimate revision trend for full-year 2016 remains unfavorable with 10 estimates moving down and no revision in the opposite direction over the past couple of months. Earnings estimates have also moved down by 5 cents over this period to $7.92 per share. With the company lowering its full-year 2016 guidance, we expect this gloomy scenario to continue.
Pricing continues to remain a major headwind for Zimmer Biomet. The company’s revenue growth in the reported quarter was partially offset by continued pricing pressure, mostly in the America and Europe operating segments. Additionally, the knee and hip businesses were affected by negative pricing pressure of 2% and 2.4%, respectively.
The presence of a large number of players has made the medical devices market intensely competitive. This compels Zimmer Biomet to constantly strive in product innovation to maintain its market share. Also, currency fluctuations add to its woes.
On a positive note, we look forward to the expected synergy from the recently completed LDR Holding acquisition, which should broaden and complement the company's musculoskeletal offering. This one is in line with its strategy to grow through inorganic mean by focusing on mega acquisitions.
Management is also striving to develop its spine portfolio in order to cash in on the opportunities. Reportedly, in the third quarter, Zimmer Biomet saw a 23.9% improvement in its Spine and CMF segment. The company’s spine offerings such as Mobi-C Cervical Disc prosthesis and Vitality Spinal Fixation System showed a considerable improvement in performance. The company considers itself well positioned in the spine business, courtesy of the acquisition of French spine device maker LDR Holding. We believe that the buyouts and new spine offerings such as the recently launched PrimaGen Advanced Allograft should boost its share price in the near term.
Over the recent past, Zimmer Biomet has been working to strengthen its foothold in emerging markets that provide long-term opportunities. The company’s strategic investments in these regions over the past several quarters to improve operational and sales performance are yielding results. With the acquisition of BioMet, the combined company has started to benefit from strong presence in emerging markets with an extended portfolio that includes upper and lower joint products.
Zacks Rank & Key Picks
Zimmer Biomet currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical rallied 22.6% over the last one year compared with the S&P 500’s 11.9%. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International gained 21.7% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 114.7% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
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Zimmer Biomet (ZBH): Spine Group Solid, Q3 Results a Drag
On Dec 19, we issued an updated research report on Warsaw, IN-based Zimmer Biomet Holdings Inc. (ZBH - Free Report) . It is a leading musculoskeletal healthcare company that designs and distributes orthopedic reconstructive products, spine, bone healing, thoracic products; dental implants; and related surgical products.
Over the past six months, Zimmer Biomet traded neck on neck with the Zacks categorized Medical Product industry. However, things took an adverse turn in late October with the company posting disappointing third-quarter 2016 results. The stock lost 19.1% over the past six months as compared to the broader industry’s decline of 8.7%.
Apart form the quarterly debacle, estimate revision trend for full-year 2016 remains unfavorable with 10 estimates moving down and no revision in the opposite direction over the past couple of months. Earnings estimates have also moved down by 5 cents over this period to $7.92 per share. With the company lowering its full-year 2016 guidance, we expect this gloomy scenario to continue.
Pricing continues to remain a major headwind for Zimmer Biomet. The company’s revenue growth in the reported quarter was partially offset by continued pricing pressure, mostly in the America and Europe operating segments. Additionally, the knee and hip businesses were affected by negative pricing pressure of 2% and 2.4%, respectively.
The presence of a large number of players has made the medical devices market intensely competitive. This compels Zimmer Biomet to constantly strive in product innovation to maintain its market share. Also, currency fluctuations add to its woes.
On a positive note, we look forward to the expected synergy from the recently completed LDR Holding acquisition, which should broaden and complement the company's musculoskeletal offering. This one is in line with its strategy to grow through inorganic mean by focusing on mega acquisitions.
Management is also striving to develop its spine portfolio in order to cash in on the opportunities. Reportedly, in the third quarter, Zimmer Biomet saw a 23.9% improvement in its Spine and CMF segment. The company’s spine offerings such as Mobi-C Cervical Disc prosthesis and Vitality Spinal Fixation System showed a considerable improvement in performance. The company considers itself well positioned in the spine business, courtesy of the acquisition of French spine device maker LDR Holding. We believe that the buyouts and new spine offerings such as the recently launched PrimaGen Advanced Allograft should boost its share price in the near term.
Over the recent past, Zimmer Biomet has been working to strengthen its foothold in emerging markets that provide long-term opportunities. The company’s strategic investments in these regions over the past several quarters to improve operational and sales performance are yielding results. With the acquisition of BioMet, the combined company has started to benefit from strong presence in emerging markets with an extended portfolio that includes upper and lower joint products.
Zacks Rank & Key Picks
Zimmer Biomet currently has a Zacks Rank #4 (Sell). Better-ranked medical stocks are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical rallied 22.6% over the last one year compared with the S&P 500’s 11.9%. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International gained 21.7% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 114.7% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>