Today is shaping up negative for Zimmer Biomet Holdings, Inc. (NYSE:ZBH) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the current consensus, from the 26 analysts covering Zimmer Biomet Holdings, is for revenues of US$6.9b in 2022, which would reflect a not inconsiderable 12% reduction in Zimmer Biomet Holdings' sales over the past 12 months. Statutory earnings per share are presumed to soar 95% to US$3.76. Previously, the analysts had been modelling revenues of US$8.1b and earnings per share (EPS) of US$5.23 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.
The consensus price target fell 14% to US$134, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Zimmer Biomet Holdings at US$182 per share, while the most bearish prices it at US$102. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Zimmer Biomet Holdings' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 12% to the end of 2022. This tops off a historical decline of 0.9% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 8.2% per year. So while a broad number of companies are forecast to grow, unfortunately Zimmer Biomet Holdings is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Zimmer Biomet Holdings' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Zimmer Biomet Holdings.
A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.
We also provide an overview of the Zimmer Biomet Holdings Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.