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Here's Why You Should Retain Zimmer Biomet (ZBH) for Now
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Zimmer Biomet (ZBH - Free Report) is well-poised for growth in the coming quarters, backed by a strong recovery in its business. Zimmer Biomet’s Knee business to drive pricing stability, mix benefit and competitive conversions. However, a difficult macroeconomic situation leading to mounting expenses puts pressure on the operating margin.
In the past year, this Zacks Rank #3 (Hold) stock has increased 7.6% compared with the 1.2% rise of the industry and the 20.3% rise of the S&P 500 composite.
The leading musculoskeletal healthcare company has a market capitalization of $23.50 billion. The company has an earnings yield of 6.78% against the industry’s -1.62%. Zimmer Biomet surpassed estimates in three of the trailing four quarters and was breakeven in one, delivering an average earnings surprise of 4.47%.
Let’s delve deeper.
Tailwinds
Business Recovery Continues: Zimmer Biomet has witnessed a rebound in its business for the past few quarters despite macroeconomic challenges.
U.S. sales rose 5% in the second quarter, well ahead of the company’s expectations, with elective procedure volumes recovering and procedure cancellation rates returning to pre-pandemic levels. International sales grew 7.2%, driven by strong EMEA and Asia Pacific performance. All regions benefited from continued recovery of elective procedures, backlog recapture and strong commercial execution and new product uptake.
Focus on Emerging Markets to Drive Growth: Over the recent past, Zimmer Biomet has been working to strengthen its foothold in emerging markets that provide long-term opportunities for growth. The company's strategic investments in these regions over the past several quarters to improve operational and sales performance are yielding results. While the integration of Biomet is over, the combined company has started to benefit from a strong presence in emerging markets with an extended portfolio that includes upper and lower joints. According to the combined company, this will help develop the extremities and trauma business in the future. Zimmer Biomet expects to establish critical mass in spine and dental that will position the company to compete effectively and gain a share in these significant markets.
Gradually Stabilizing Market: Despite challenging market conditions in the form of pricing pressure, the last few quarters witnessed gradual stability in the global musculoskeletal market with better-than-expected sales growth in specific geographies, banking on improved procedural volume. This was driven by favorable demographics and the growing utilization of musculoskeletal healthcare in emerging and under-penetrated developed markets. The focused execution of the company's global sales teams amid a stable global musculoskeletal market also helped accelerate global sales for Persona, the personalized knee system.
Downsides
Macroeconomic Concerns: Although Zimmer Biomet is gradually coming out of the impact of the two-and-a-half-year-long healthcare crisis, the ongoing industry-wide trend of staffing shortages and supply chain-related hazards is denting growth. Deteriorating international trade, with global inflationary pressure leading to a challenging situation related to raw material and labor costs as well as freight charges and rising interest rates all have put the dental treatment space (which is highly-elective) in a tight spot.
Image Source: Zacks Investment Research
Pricing Pressure Continues to Persist: Pricing remains a major headwind for Zimmer Biomet. The company's top-line growth in the reported quarter was partially offset by continued pricing pressure, mainly in the Americas and Europe operating segments. We remain concerned about the pricing scenario as it will be affected by cost containment efforts by governmental healthcare, local hospitals and health systems. Zimmer Biomet expects price erosion of 100-150 basis points in the second half of 2023.
Estimate Trend
The Zacks Consensus Estimate for Zimmer Biomet’s 2023 earnings per share (EPS) has increased from $7.45 to $7.51 in the past 90 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $7.40 billion. This suggests a 6.7% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , HealthEquity, Inc. (HQY - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.7%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, with an average surprise of 21.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita has gained 19.1% against the industry’s 0.4% decline in the past year.
HealthEquity, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 23.5%. HQY’s earnings surpassed estimates in all the trailing four quarters, with an average of 13%.
HealthEquity has gained 3.4% against the industry’s 4% decline in the past year.
Integer Holdings, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Integer Holdings has gained 28.5% compared with the industry’s 4.2% rise in the past year.
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Here's Why You Should Retain Zimmer Biomet (ZBH) for Now
Zimmer Biomet (ZBH - Free Report) is well-poised for growth in the coming quarters, backed by a strong recovery in its business. Zimmer Biomet’s Knee business to drive pricing stability, mix benefit and competitive conversions. However, a difficult macroeconomic situation leading to mounting expenses puts pressure on the operating margin.
In the past year, this Zacks Rank #3 (Hold) stock has increased 7.6% compared with the 1.2% rise of the industry and the 20.3% rise of the S&P 500 composite.
The leading musculoskeletal healthcare company has a market capitalization of $23.50 billion. The company has an earnings yield of 6.78% against the industry’s -1.62%. Zimmer Biomet surpassed estimates in three of the trailing four quarters and was breakeven in one, delivering an average earnings surprise of 4.47%.
Let’s delve deeper.
Tailwinds
Business Recovery Continues: Zimmer Biomet has witnessed a rebound in its business for the past few quarters despite macroeconomic challenges.
U.S. sales rose 5% in the second quarter, well ahead of the company’s expectations, with elective procedure volumes recovering and procedure cancellation rates returning to pre-pandemic levels. International sales grew 7.2%, driven by strong EMEA and Asia Pacific performance. All regions benefited from continued recovery of elective procedures, backlog recapture and strong commercial execution and new product uptake.
Focus on Emerging Markets to Drive Growth: Over the recent past, Zimmer Biomet has been working to strengthen its foothold in emerging markets that provide long-term opportunities for growth. The company's strategic investments in these regions over the past several quarters to improve operational and sales performance are yielding results. While the integration of Biomet is over, the combined company has started to benefit from a strong presence in emerging markets with an extended portfolio that includes upper and lower joints. According to the combined company, this will help develop the extremities and trauma business in the future. Zimmer Biomet expects to establish critical mass in spine and dental that will position the company to compete effectively and gain a share in these significant markets.
Gradually Stabilizing Market: Despite challenging market conditions in the form of pricing pressure, the last few quarters witnessed gradual stability in the global musculoskeletal market with better-than-expected sales growth in specific geographies, banking on improved procedural volume. This was driven by favorable demographics and the growing utilization of musculoskeletal healthcare in emerging and under-penetrated developed markets. The focused execution of the company's global sales teams amid a stable global musculoskeletal market also helped accelerate global sales for Persona, the personalized knee system.
Downsides
Macroeconomic Concerns: Although Zimmer Biomet is gradually coming out of the impact of the two-and-a-half-year-long healthcare crisis, the ongoing industry-wide trend of staffing shortages and supply chain-related hazards is denting growth. Deteriorating international trade, with global inflationary pressure leading to a challenging situation related to raw material and labor costs as well as freight charges and rising interest rates all have put the dental treatment space (which is highly-elective) in a tight spot.
Pricing Pressure Continues to Persist: Pricing remains a major headwind for Zimmer Biomet. The company's top-line growth in the reported quarter was partially offset by continued pricing pressure, mainly in the Americas and Europe operating segments. We remain concerned about the pricing scenario as it will be affected by cost containment efforts by governmental healthcare, local hospitals and health systems. Zimmer Biomet expects price erosion of 100-150 basis points in the second half of 2023.
Estimate Trend
The Zacks Consensus Estimate for Zimmer Biomet’s 2023 earnings per share (EPS) has increased from $7.45 to $7.51 in the past 90 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $7.40 billion. This suggests a 6.7% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , HealthEquity, Inc. (HQY - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.7%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, with an average surprise of 21.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita has gained 19.1% against the industry’s 0.4% decline in the past year.
HealthEquity, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 23.5%. HQY’s earnings surpassed estimates in all the trailing four quarters, with an average of 13%.
HealthEquity has gained 3.4% against the industry’s 4% decline in the past year.
Integer Holdings, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Integer Holdings has gained 28.5% compared with the industry’s 4.2% rise in the past year.