Yahoo Finance Here's Why You Should Buy Zimmer Biomet (ZBH) Stock Now
Zimmer Biomet ZBH is gaining from expansion in the Knee business. Despite challenging market conditions in the form of pricing pressure, the company witnessed gradual stability in the global musculoskeletal market in the past few quarters.
Meanwhile, unfavorable solvency and an intense competitive landscape remain concerning for the company.
In the past year, this Zacks Rank #2 (Buy) stock has increased 13.9% compared with the 11.6% rise of the industry and the 21.5% growth of the S&P 500 composite.
The leading musculoskeletal healthcare company has a market capitalization of $26.22 billion. Zimmer Biomet surpassed estimates in three of the trailing four quarters and broke even in one, delivering an average earnings surprise of 4.99%.
Let’s delve deeper.
Tailwinds
Four-Pillar Strategy to Expand the Knee Business: Zimmer Biomet implemented four meaningful pillars inside its Knee business to drive pricing stability, mix benefits and competitive conversions. Under the first pillar, the company is focusing on the ROSA Robotic Platform combined with its Persona Cementless Knee. ZBH expects that ROSA and Persona cementless together will enhance its robotics and cementless penetration from the current 20% level into the 50-60% range at a rapid pace.
The second pillar is focused on Persona revision. This provides a meaningful conversion and mix opportunities inside the revision category. Under the third pillar, Zimmer Biomet plans to work on the overall shift of the company’s legacy knee systems to a fully rounded-out Persona portfolio. The fourth pillar will focus on the development of the world's first and only Smart Knee- Persona iQ, which is still in limited launch per its current status.
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 certain geographies, banking on improved procedural volume.
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In line with this, in the fourth quarter of 2023, the company witnessed strong growth driven by continued procedure recovery, strong execution and solid momentum with the innovation.
Business Recovery Continues: Zimmer Biomet witnessed a rebound in its business in the past few quarters despite macroeconomic challenges. According to the company, procedure recovery continues successfully, aided by no meaningful impact from COVID or staffing challenges.
In Q4, U.S. sales rose 4.4% year over year. As the company enters 2024, procedure volume is found to be very strong in both Knee and Hip, banking on improving the market scenario. International sales grew 8.7% year over year at constant exchange rate. All regions benefited from continued recovery of elective procedures, backlog recapture as well as strong commercial execution and new product uptake.
Downsides
Competitive Landscape: The presence of a large number of players has made the medical devices market intensely competitive. The orthopedic industry, in particular, is highly competitive with the presence of players like Stryker, Johnson & Johnson's DePuy, Smith & Nephew and Medtronic.
Exposed to Currency Movement: A substantial portion of Zimmer Biomet’s foreign revenues is generated in Europe and Japan. In recent times, significant increases in the value of the U.S. Dollar relative to the Euro, the Japanese Yen, the Swiss Franc or other currencies are accordingly having adverse effects on the company’s results of operations.
Estimate Trend
The Zacks Consensus Estimate for Zimmer Biomet’s 2024 earnings per share (EPS) moved up from $7.94 to $8.08 in the past 90 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $7.76 billion. This suggests a 4.9% rise from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks from the broader medical space are Stryker Corporation SYK, Cencora, Inc. COR and Cardinal Health CAH.
Stryker, carrying a Zacks Rank #2, reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
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Stryker Corporation (SYK) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
Cencora, Inc. (COR) : Free Stock Analysis Report
Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
