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Zimmer Biomet Hits New 52-Week High: What's Driving It?

Zacks Equity Research

Shares of Zimmer Biomet Holdings, Inc. ZBH reached a new 52-week high of $151.29 on Dec 23, closing the session marginally lower at $151.24. The stock has rallied 7.8% since its third-quarter earnings announcement on Nov 5.

The company’s strong third-quarter earnings results, backed by robust segmental and global revenue growth, prompted the rally.

Let us delve deeper.

Q3 Performance

The company exited the third quarter on a strong note, with better-than-expected earnings and revenue numbers. It witnessed year-over-year improvements in revenues in the majority of its segments as well as across Europe, Middle East and Africa (EMEA) and the Asia Pacific.


 

Zimmer Biomet is upbeat about continuing the recent trend in the EMEA and the Asia Pacific on product launches and strong customer adoptions. The company expects the trend to continue in the upcoming quarters as well.

Despite a rise in the cost of products sold, the company registered gross margin improvement on solid top-line performance. This also buoyed investors’ optimism.

Other Growth Drivers

Recent Approvals and Product Launches: Investors seem to be upbeat about the company as it provides some top-of-the-line products in the industry. Strong adoption of its products — Persona Revision Knee System (which was recently launched commercially), JuggerStitch meniscal repair device, The Tether for treatment of scoliosis and ROSA ONE Spine System (recently cleared for use by the FDA) — is a key catalyst.

The company’s mymobility digital health platform (developed in partnership with Apple in October 2018) and the recent major launches of flagship products like Persona Partial and Persona Cementless instill optimism as well.

Partnership: Zimmer Biomet signed a multinational distribution agreement with Align Technology, with respect to the iTero Element family of intraoral scanners. The agreement is expected to expand the company’s footprint in the global digital restorative dentistry solutions market.

Execution of Growth Plans: The company progressed well with quality remediation in the third quarter. Completion of the detailed remediation plan on the Warsaw North campus is currently part of the company’s pipeline. Additionally, the company is gaining from the global rollout of the Quality Begins With Me program, which is focused on driving sustainable quality culture.

Zacks Rank & Key Picks

Currently, Zimmer Biomet carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, NuVasive, Inc NUVA and ResMed Inc RMD.

Haemonetics, currently flaunting a Zacks Rank #2 (Buy), has a projected long-term earnings growth rate of 13.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Vision’s long-term earnings growth rate is estimated at 17.8%. The company currently carries a Zacks Rank #2.

ResMed’s long-term earnings growth rate is estimated at 14%. It currently carries a Zacks Rank #2.

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