Here's Why Investors Should Invest in Zimmer Biomet (ZBH) Now
Zimmer Biomet Holdings, Inc. ZBH is gaining from strong elective procedure recovery and commercial execution, especially in the knee and hip businesses. The company has been working to strengthen its foothold in emerging markets. However, consistent foreign exchange woes and stiff competition do not bode well.
The renowned musculoskeletal healthcare company has a market capitalization of $26.98 billion. The company has a long-term projected growth of 6.2% compared with the industry’s growth projection of 14.6%. The stock has declined 1.1% compared with a 38.9% fall in the industry and a 10% decline in the S&P 500.
With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.
Factors At Play
Business Recovery Continues: Zimmer Biomet witnessed a rebound in its business in the past few quarters despite macroeconomic challenges.
In fourth-quarter 2022, U.S. sales rose 6.2%, driven by strong elective procedure recovery and commercial execution, especially in Zimmer Biomet’s Knee and Hip businesses. The global knees business rose 10.2%, with U.S. knees up 10.8% and international knees up 9.3%. The strong performance was driven by knee procedure recovery across most regions and an easier comp outside the United States. Global hips increased 8.4%, with U.S. hips up 9.5% and international hips up 10.8%, driven by strong international procedure recovery and easier comps outside the United States.
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Focus on Emerging Markets to Drive Growth: In 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 get benefitted from a strong presence in emerging markets with an extended portfolio that includes upper and lower joints.
Markets opportunity is expected to grow to $66.6 billion by 2025 for the orthopedic implants globally. Within the emerging market, we note that strength in the Asia Pacific market has continued to drive strong revenue growth. Post the COVID-19 mayhem, Zimmer Biomet is expected to continue with this trend, banking on a cadence of product launches and strong customer adoptions.
Dental and Spine Spin-Off to Bode Well: Zimmer Biomet recently completed its planned spin-off procedure of the dental & spine arm. According to Zimmer Biomet management, this planned spin-off of its Spine and Dental business is part of the company’s third phase of ongoing transformation, which includes changing the complexion of the business through active portfolio management to accelerate growth and drive value creation. Per management, the transaction is an important next step in its transition into a more streamlined company with a focus on greater and more optimized resource allocation toward innovation in core businesses that are profitable and where it sees attractive markets with opportunities to become market leaders.
Downsides
Competitive Landscape: The presence of many players has made the medical devices market intensely competitive. The orthopedic industry is highly competitive with players like Stryker, Johnson & Johnson's DePuy, Smith & Nephew and Medtronic. Zimmer Biomet must constantly introduce or acquire new products to withstand competitive pressure and maintain its market share.
Exposed to Currency Movement: Zimmer Biomet records a significant portion of its sales from the international market. This makes it highly exposed to currency fluctuations.
Estimate Trend
Zimmer Biomet has been witnessing a positive estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its 2023 earnings has moved 1.4% north to $7.04.
The Zacks Consensus Estimate for 2023 revenues is pegged at $7.13 billion, suggesting a 2.8% rise from the 2022 reported number.
Key Picks
Some other top-ranked stocks in the broader medical space are Hologic, Inc. HOLX, Henry Schein, Inc. HSIC and Avanos Medical, Inc. AVNS.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic has gained 3.3% against the industry’s 17.1% growth in the past year.
Henry Schein, carrying a Zacks Rank #1 at present, has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.
Henry Schein has lost 6.2% compared with the industry’s 5.8% decline in the past year.
Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has lost 10.2% compared with the industry’s 17.1% decline in the past year.
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Hologic, Inc. (HOLX) : Free Stock Analysis Report
Henry Schein, Inc. (HSIC) : Free Stock Analysis Report
Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
AVANOS MEDICAL, INC. (AVNS) : Free Stock Analysis Report
