Zimmer Biomet Holdings, Inc. ZBH is gaining from continued procedure recovery, solid execution and increasing traction around innovations. The company has been working to strengthen its foothold in emerging markets that provide long-term opportunities for growth.
In the past year, the Zacks Rank #1 (Strong Buy) stock has gained 13.4% against a 29.4% fall of the industry and a 7.1% rise in the S&P 500.
The renowned musculoskeletal healthcare company has a market capitalization of $28.37 billion. The company has a long-term projected growth of 7.3%.
Let’s delve deeper.
Factors At Play
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. This was driven by favorable demographics and growing utilization of musculoskeletal healthcare in emerging markets and under-penetrated developed markets.
In line with this, during the fourth quarter earnings update, the company noted that it witnessed better than expected growth driven by continued procedure recovery, strong execution, and a solid momentum with the new innovation and also benefited from some favorable comps in the quarter. The company saw another positive quarter of year-over-year momentum in large joints, with the overall global hip and knee business growing more than 8% and 10%, excluding foreign exchange.
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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 in the past several quarters to improve operational and sales performance are yielding.
Markets opportunity is expected to grow to $66.6 billion by 2025 for the orthopedic implants globally. Within emerging market, we note that strength in Asia Pacific market continued to drive strong revenue growth so far. Post the COVID-19 mayhem gets past; banking on a cadence of product launches and strong customer adoptions, Zimmer Biomet is expected to continue with this trend. In the first quarter, Zimmer Biomet’s international sales rose 14% driven by faster recovery and strength across developed and emerging markets.
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. As per management, for Zimmer Biomet, the transaction is an important next step in the company’s transition into a more streamlined company with focus in 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.
Upbeat Guidance: During the first quarter, Zimmer Biomet raised its 2023 outlook. Revenue growth is now expected to be in the band of 5%-6% compared with 2022 (a significant increase from the earlier band of 1.5%-3.5%).
Adjusted earnings per share for the full year is expected in the range of $7.40-$7.50 ($6.95-$7.15 earlier). The Zacks Consensus Estimate for 2023 adjusted earnings is pegged at $7.04 on revenues of $7.13 billion.
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 10.1% north to $7.45.
The Zacks Consensus Estimate for 2023 revenues is pegged at $7.45 billion, suggesting an 8.1% rise from the 2022 reported number.
A few other top-ranked stocks in the broader medical space are Addus Homecare Corporation ADUS, Merit Medical Systems, Inc. MMSI and Davita Inc DVA.
The Zacks Consensus Estimate for Addus Homecare’s 2023 earnings indicates 10.9% year-over-year growth. The Zacks Consensus Estimate for ADUS’s 2023 earnings has moved 0.5% north in the past 30 days. It currently carries a Zacks Rank #2.
Addus Homecare has a long-term estimated growth rate of 11.8%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merit Medical reported a first-quarter 2023 adjusted EPS of 64 cents, beating the Zacks Consensus Estimate by 16.4%. Revenues of $297.6 million surpassed the Zacks Consensus Estimate by 5.9%. It currently carries a Zacks Rank #2.
Merit Medical has a long-term estimated growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
DaVita, carrying a Zacks Rank #2 at present, has a long-term estimated growth rate of 14.6%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 17.3%.
DaVita has lost 1.9% compared with the industry’s 18% decline over the past year.
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