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Zimmer Biomet (ZBH) Shows Strong APAC Recovery, EMEA Slow

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On Jan 5, we issued an updated research report on Zimmer Biomet Holdings, Inc. (ZBH - Free Report) . The company continues to gain market share in the Asia Pacific (APAC), Europe, the Middle East and Africa (EMEA) regions. However, pricing continues to be a major concern. The stock currently has a Zacks Rank #3 (Hold).

Over the past year, Zimmer Biomet has outperformed its industry. The stock has gained 3.6% compared with 3.5% rise of the industry. Zimmer Biomet ended the third quarter of 2020 with a slower return in EMEA region. The pace of procedure volume and patient returns slowed toward the end of the quarter.

In terms of operating segments, the global knee business declined 47% while the global hip business declined 1.4% in the third quarter. The hip business registered dull growth outside the United States. Overall business in the EMEA decreased 5.7% and the company observed a slowing recovery rate in September due to rise in incidence of COVID-19 and corresponding policy actions. In APAC, India and other small Southeast Asian countries continued to significantly underperform the broader region.

According to Zimmer Biomet, the impact of COVID-19 is still significant and remains fluid. Owing to lack of clarity around the scope and duration of the pandemic, the company is still unable to gauge the impact on its overall business. Accordingly, it did not provide any full-year guidance.

On a positive note, Zimmer Biomet noted that the quarter had clearly shown signs of recovery. According to the company, the overall performance was better than expected across all regions in the third quarter. In particular, it saw a steeper rate of recovery in July, followed by a more modest recovery or even a flattening of the curve toward the end of the quarter. According to Zimmer Biomet, the company returned to growth over 2019 faster than it had expected.

Stronger recovery was seen in the Americas and Asia Pacific while there was a slower return in regions within Europe, the Middle East and Africa (EMEA).

The company is also performing well in its priority areas like quality remediation, supply recovery efforts and product introductions. With respect to quality remediation, it made good progress in the third quarter.

Of late, Zimmer Biomet has been solidifying its foothold in the emerging markets offering long-term opportunities. The company’s strategic investments in these zones over the last several quarters to improve its operational and sales performance are yielding results. It expects consistent growth in the APAC and EMEA markets this year.

The company should benefit from favorable long-term trends, driven by obesity, wear and tear of joints from more active lifestyles, uptick in the emerging markets, new material technologies, advancements in the surgical techniques and proven clinical benefits of joint replacement procedures.

Key Picks

Some better-ranked stocks from the broader medical space are Amedisys (AMED - Free Report) , IDEXX Laboratories  (IDXX - Free Report) and Integra LifeSciences Holdings (IART - Free Report) .

Amedisys’ long-term earnings growth rate is estimated at 14.8%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2.

Integra’s long-term earnings growth rate is estimated at 9%. The company presently carries a Zacks Rank #2.

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