Zimmer Biomet (ZBH) Upgraded To Hold On Solid Prospects
Zacks Investment Research | Apr 10, 2017 04:22AM ET
On Apr 7, leading musculoskeletal healthcare company Zimmer Biomet Holdings, Inc. (NYSE:ZBH) was raised to a Zacks Rank #3 (Hold).
We believe the upgrade was primarily driven by Zimmer Biomet’s rising share price over the last one month. The stock gained 0.1%, comparing favorably with the 1.1% decline of the Zacks classified Medical-Products industry. The company has also recorded a 5-year CAGR of 14.5% for revenues and an impressive long-term earnings growth rate of 10.5% versus the industry average of 5.2%.
Management's 2017 guidance announced in the last reported fourth quarter of 2016 indicates sustainability of growth. The company is also witnessing improvement in its knee segment.
Zimmer Biomet is continuously pursuing mega acquisitions. We are looking forward to the company’s LDR Holding buyout, which should complement its musculoskeletal line of offerings. Management believes this buyout will accelerate its Spine business’ performance to a considerable extent.
Over the recent past, Zimmer Biomet has been working to strengthen its foothold in emerging markets that provide long-term opportunities for growth. Despite the damaging effect of the global economic downturn on Zimmer Biomet’s Latin American business, emerging markets of Asia Pacific and EMEA continue to drive growth.
Meanwhile, management currently plans to invest more in research and development, medical training and education with an aim to develop and introduce cutting-edge musculoskeletal products and services to achieve improved patient outcome. The company also expects its expanded sales force to be effective across varied geographies with increased access to a broader portfolio.
On the flip side, pricing continues to remain a major headwind for the company. Zimmer Biomet is further concerned about the cost containment efforts by governmental healthcare, local hospitals and health systems.
The presence of a large number of players like Stryker and Medtronic (NYSE:MDT) has made the orthopedic industry intensely competitive. Zimmer Biomet needs to constantly introduce or acquire new products to counter competition and maintain market share. Also, the company records a significant portion of its sales from the international market. This makes it highly exposed to currency fluctuations and macroeconomic uncertainties.
Key Picks
Better-ranked stocks in the broader Medical space include Inogen, Inc. (NASDAQ:INGN) , Orasure Technologies, Inc. (NASDAQ:OSUR) and Hill-Rom Holdings, Inc. (NYSE:HRC) . While Inogen sports a Zacks Rank #1 (Strong Buy), Orasure and Hill-Rom carry a Zacks Rank #2 (Buy). You can see .
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Inogen gained 62.2% in the last one year compared with the S&P 500’s gain of 15.1%. The company reported a stellar four-quarter positive average earnings surprise of over 49.08%.
Orasure surged 73.9% in the last one year compared with the S&P 500’s gain. Its four-quarter average earnings surprise was a positive of 123.5%.
Hill-Rom gained over 33.9% in the past one year, better than the S&P 500 mark. It posted a trailing four-quarter positive average earnings surprise of 12.03%.
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