Zimmer Biomet, a stalwart in the musculoskeletal healthcare market, is poised for growth, underpinned by its meticulous attention to strategic pillars within its Knee business. The company is capitalizing on the uptick in procedural volumes amid the stabilization of the global musculoskeletal market. Moreover, Zimmer Biomet’s ventures into emerging markets hold the promise of long-term expansion, instilling confidence in its trajectory.
Nevertheless, the company grapples with looming solvency issues and contends with a fiercely competitive landscape.
Zimmer Biomet, branded as a Zacks Rank #2 (Buy) stock, has outstripped the industry’s 6% ascent with its own 0.9% uptick over the past year, albeit trailing behind the S&P 500 composite’s 25.5% surge.
The eminent musculoskeletal healthcare company boasts a $26.1 billion market capitalization and a noteworthy earnings yield of 6.46% — a stark contrast to the industry’s -1.35%. Moreover, Zimmer Biomet has outpaced market expectations in three of the last four quarters, achieving an average earnings surprise of 4.99%.
Let’s delve deeper into what drives this orthopedic juggernaut.
Uplifting Factors
Focused Business Expansion: Embracing a four-pillar strategy for its Knee business, Zimmer Biomet is leveraging the ROSA Robotic Platform in conjunction with its Persona Cementless Knee. Additionally, it is eyeing meaningful opportunities through the Persona revision, pivoting the legacy knee systems, and unveiling the world’s first and only Smart Knee, Persona iQ.
Image Source: Zacks Investment Research
Zimmer Biomet’s dedication to fortifying its presence in developed and emerging markets augurs well for its long-term growth prospects. Steadfast investments have yielded dividends, particularly in the Asia Pacific region, driving robust revenue growth. The company is also benefitting from the gradual stabilization of the global musculoskeletal market amid improved procedural volumes.
The company’s impressive fourth-quarter performance, characterized by strong revenue growth and sustained momentum, underscores its positive momentum in large joints, global Knees, Hips and S.E.T. business.
Challenges to Overcome
Debt Concerns: A worrying aspect of Zimmer Biomet’s financials is its leveraged capital structure, evidenced by its cash and cash equivalents of $415.8 million pitted against near-term payable debt of $900 million. Amid economic uncertainties, the company’s liquidity for short-term debt repayment raises red flags. Furthermore, total long-term debt has risen from $5.69 billion to $5.77 billion over the past year.
Intense Competition: Enduring in a medical device landscape brimming with players, Zimmer Biomet must continue to innovate or acquire new products to stay competitive, especially amid the domineering presence of companies like Stryker and Medtronic in the orthopedic industry.
Estimate Trend
Projections for Zimmer Biomet’s 2024 earnings per share (EPS) have risen from $7.95 to $8.06 in the past 30 days, while its 2024 revenues are estimated at $7.76 billion, signifying a 4.9% surge from the previous year.
Other Key Selections
In the medical domain, noteworthy stocks like Cardinal Health (CAH), Stryker (SYK), and DaVita (DVA) stand out. Cardinal Health possesses a Zacks Rank #2, while Stryker and DaVita both tread with a Zacks Rank #1. Each of these companies has its own unique growth potential and merits detailed consideration.
A fantastic opportunity awaits, with select stocks positioned to soar by 100% or more in 2023. The returns from previous recommendations are nothing short of spectacular.
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