Dj Cfo Upadhyay Acquires 8851 Of Zimmer Biomet Holdings Inc >Zbh

Zimmer Biomet's ZBH strategic product launches and stabilizing market trends bolster our confidence in this stock. Yet, factors like macroeconomic uncertainties put pressure on the bottom line. The stock carries a Zacks Rank #3 (Hold).

Factors Driving ZBH's Share Price

Zimmer Biomet is witnessing strong market share gains within the reconstructive Knees and Hips in key geographies in recent times despite macroeconomic challenges. The third quarter of 2024 marks the 11th consecutive quarter in which Zimmer Biomet's revenues have grown mid-single digit or above. The International business, overall, exceeded sales expectations in the third quarter, backed by strong demand in key markets across both Reconstructive Knees, Hips and the S.E.T. categories.

Although the company’s Knee business witnessed some challenges posed by the ERP system implementation, internationally, this business grew 10% in the quarter. Further, the Oxford Partial cementless Knee launch in 2025 is expected to drive 60% share in the European market. Within Hips, the company expects the upcoming launches of Z1 HAMMR and Navigation, like OrthoGrid and ROSA posterior in Europe, to drive market share. Zimmer Biomet also currently looks forward to a strong pickup of ROSA Shoulder in 2025.

Currently, Zimmer Biomet is in its diversification journey with its S.E.T. (comprising Surgical, Sports, Upper Extremities, and Restorative Therapies) business. The company has strategically grown S.E.T. sales by at least mid-single digits in recent times. Zimmer Biomet currently expects this trend to continue toward the end of 2024 and also in 2025 and 2026, driven by consistent market share gains of CMFT (Craniomaxillofacial and Thoracic), Sports and Upper Extremities.

The company is currently focusing on ROSA Robotic Platform combined with its Persona cementless Knee. According to Zimmer Biomet, this is a powerhouse combination that will continue to accelerate growth. Zimmer Biomet expects ROSA and Persona cementless together to enhance its robotics and cementless penetration from the current 20% level to 50% to 60% range at a rapid pace.

Zimmer Biomet Holdings, Inc. Price

Zimmer Biomet Holdings, Inc. price | Zimmer Biomet Holdings, Inc. Quote

In fact, the company currently expects the penetration rate of cementless knees to increase drastically in 2024 banking on new product launches. In this regard, following the company’s alliance with THINK Surgical, Zimmer Biomet has become the only orthopedic company in the world that will offer both a handheld CT scan-based system in the TMINI, exclusive for Zimmer Biomet platform, as well as a simplified, CT scan-less robotic system in the current form factor of ROSA for total knee arthroplasty.

Over the past three months, shares of ZBH have gained 1.1% compared with the industry’s 9.3% growth. With the company consistently focusing on strategic market expansion and new product launches, we expect the stock to gain momentum in the coming days.

Factors Affecting ZBH's Growth

The ongoing industry-wide trend of staffing shortages and supply chain-related hazards is denting growth for Zimmer Biomet. Deteriorating international trade and geopolitical complications lead to a tough situation related to raw material and labor cost as well as freight charges. Added to this, a high interest rate scenario has put the dental treatment space (which is highly elective) in a tight spot. Within the Hip category, headwinds in Russia are disproportionately impacting the outside U.S. business. Further, within the S.E.T. category, Zimmer Biomet is facing challenges in the form of reimbursement headwinds, particularly in the Restorative Therapies business. In addition, the company also noted about experiencing acute supply challenges within Sports and Trauma. All these are creating significant pressure on the company’s revenues and operating profit.

During the third quarter, the company incurred 3.9% increase in cost of product sold (excluding intangible asset amortization) and a 3.1% rise in selling, general and administrative expenses. Adjusted gross margin reflected a contraction of 34 basis points, while the adjusted operating margin contracted 18 bps in the quarter.

Further, a substantial portion of Zimmer Biomet’s foreign revenues is generated in Europe and Japan. In recent times, significant increases in the value of the dollar relative to the euro, the Japanese yen, the Swiss franc, or other currencies have had an adverse effect on the company’s operations. In the third quarter of 2024, Zimmer Biomet’s net sales were affected by 0.1% due to changes in foreign exchange rates. For the full year, the company currently expects an adverse impact of 75 basis points from foreign exchange on its revenues.

Key Picks

Some better-ranked stocks in the broader medical space are Globus Medical GMED, Boston Scientific BSX and ResMed RMD. While GMED sports a Zacks Rank #1 (Strong Buy), BSX and RMD carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for Globus Medical’s 2024 EPS have remained constant at $2.84 in the past 30 days. Shares of the company have surged 61% in the past year compared with the industry’s growth of 24.7%. GMED’s earnings surpassed estimates in each of the trailing four quarters, with the average beat being 12.1%. In the last reported quarter, it delivered an earnings surprise of 10.3%.

Boston Scientific’s shares have surged 58.3% in the past year. Estimates for the company’s earnings per share (EPS) have jumped 2.5% to $2.46 for 2024 and 0.4% to $2.72 for 2025 in the past 30 days. BSX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average beat of 8.3%. In the last reported quarter, it posted an earnings surprise of 8.6%.

Estimates for ResMed’s fiscal 2025 EPS have risen 2.2% to $9.22 in the past 30 days. Shares of the company have surged 58.8% in the past year compared with the industry’s 29.2% growth. RMD’s earnings surpassed estimates in each of the trailing four quarters, with the average beat being 6.4%. In the last reported quarter, it delivered an earnings surprise of 8.4%.

Zacks Investment Research

With an aging population and a rise in chronic health issues, medical technology innovations are rapidly becoming essential in healthcare, enabling quicker diagnoses and improved patient outcomes. The medical device industry is experiencing dynamic growth fueled by advancements in technology and increasing demand for innovative healthcare solutions.

Given this landscape, investors might consider investing in three fundamentally strong medical devices stocks, Stryker Corporation , Axogen, Inc. , and Zimmer Biomet Holdings, Inc. , that are well-positioned for potential growth.

Medical device companies specializing in surgical robotics, imaging, diagnostics, and portable health monitoring devices are delivering innovative products that meet the rising demand for efficient and less invasive treatments. The key market driver in this sector is the aging population, rising awareness and accessibility, and a surge in technological advancements.

As per the World Health Organization (WHO), the global population aged 60 and above will double to 2.1 billion by 2050. This demographic shift means the role of medical devices will be more crucial than at other times in history.

Healthcare providers and patients alike are prioritizing convenience and precision, pushing for technologies that aid in real-time monitoring and minimally invasive procedures. The United States is the largest medical device market in the world, compromising over 40% of the global MedTech market, providing physicians and other healthcare providers with the best tools to diagnose and treat patients.

According to a KPMG report, the medical device industry is poised for steady growth, with global annual sales forecasted to reach nearly $800 billion by 2030, with a rise of over 5% a year. Companies in this space benefit from long-term demand as healthcare spending remains resilient.

Now, let’s take a closer look at the fundamentals of the Medical - Devices & Equipment stocks mentioned above, beginning with the third choice.

Stock #3: Stryker Corporation (SYK)

Stryker Corporation operates as a medical technology company. The company operates through two segments: MedSurg and Neurotechnology, and Orthopaedics and Spine.

On October 1, SYK announced the completion of the acquisition of its Vertos Medical Inc., a leader in interventional pain management solutions for chronic lower back pain caused by lumbar spinal stenosis. This acquisition enhances non-surgical solutions with minimal invasive wild procedures for SYK.

On September 17, SYK announced that it completed its acquisition of care.ai, a privately held company specializing in delivering AI-assisted virtual care workflows, smart room technology, and ambient intelligence solutions. This acquisition should strengthen Stryker’s growing healthcare IT offering and wirelessly connected medical device portfolio.

In the fiscal third quarter that ended on September 30, 2024, SYK’s net sales increased 11.9% year-over-year to $5.49 billion. The company reported an operating income of $2.43 billion, indicating a 9.2% growth from the prior-year quarter.

SYK’s adjusted net earnings came in at $1.11 billion, up 17.3% year-over-year, while its adjusted earnings per share grew 16.7% from the year-ago value to $2.87.

For the full year 2024, SYK expects organic net sales to be in the range of 9.5% to 10% and adjusted net earnings diluted per share to range from $12 to $12.10.

The consensus revenue estimate of $6.36 billion for the fiscal first quarter (ending December 2024) represents a 9.4% increase year-over-year. The consensus EPS estimate of $3.87 for the same quarter indicates an 11.9% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Moreover, SYK’s revenue has grown at CAGRs of 9.7% and 8.6% over the past three and five years, respectively. In addition, its EBIT increased at 8.4% CAGR over the past three years.

Over the past year, the stock has surged 33.3%, closing the last trading session at $369.02.

SYK’s stance is apparent in its POWR Ratings. The stock has a B grade for Growth, Stability, and Sentiment. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Among the 138 stocks in the Medical - Devices & Equipment industry, it is ranked #46. Click here to see the additional SYK ratings (Value, Momentum, and Quality).

Stock #2: Axogen, Inc. (AXGN)

AXGN develops and commercializes technologies for peripheral nerve regeneration and repair worldwide. The company offers repair solutions for surgeons and healthcare providers. Its products include Avance nerve graft, Axoguard Nerve Connector, Axoguard Nerve Protector, Axoguard Nerve Cap, Axotouch Two-Point Discriminator, and Axoguard HA+ Nerve Protector.

On June 24, AXGN launched Avive+ Soft Tissue Matrix™, which is used for a soft tissue barrier and is a resorbable, multi-layer amniotic membrane allograft that provides temporary protection and tissue separation during the critical phase of peripheral nerve healing. This launch is a new opportunity to improve patient outcomes after acute traumatic injury.

During the third quarter that ended on September 30, 2024, AXGN’s revenue increased 17.9% year-over-year to $48.64 million. The company’s gross profit amounted to $36.44 million, reflecting an increase of 14.9% from the prior-year quarter.

Its adjusted EBITDA of $6.49 million, indicating a 175.6% growth from the prior-year quarter. In addition, AXGN’s adjusted net income amounted to $3.15 million and $0.07 per share, reflecting considerable increases year-over-year.

Looking ahead, AXGN anticipates annual revenue for fiscal year 2024 to fall between $182 million and $186 million. The company also projects gross margin to be in the range of 74% to 76%.

Analysts expect AXGN’s revenue for the fiscal year (ending December 2024) to increase 16.1% year-over-year to $184.60 million.

Over the past three and five years, AXGN’s revenue income grew at CAGRs of 9.9% and 12.5%, respectively, while its total assets grew at 3.8% CAGR over the past five years.

The stock has gained 290.1% over the past year and 170.4% over the past six months to close the last trading session at $15.33.

AXGN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

AXGN has an A grade for Growth and B for Sentiment. It is ranked #35 in the Medical - Devices & Equipment industry. Click here to see the other ratings of AXGN for Value, Momentum, Stability, and Quality.

Stock #1: Zimmer Biomet Holdings, Inc. (ZBH)

ZBH is a global medical technology company that designs, manufactures, and markets orthopedic reconstructive products, like knee and hip products, S.E.T. products, and craniomaxillofacial and thoracic products.

On August 7, ZBH signed an agreement to acquire OrthoGrid Systems, Inc., a privately held medical technology company focused on AI-driven surgical guidance systems for total hip replacement. This acquisition will help ZBH address the challenges of orthopedic problems with innovative technology solutions.

For the third quarter of 2024, which ended on September 30, ZBH's total revenues increased 4% year-over-year to $1.82 billion. Its operating profit rose 4.8% from the year-ago value to $279.50 million. The company’s adjusted net earnings stood at $353.20 million, up marginally year-over-year, while its adjusted EPS for the quarter increased 5.5% year-over-year to $1.74.

According to the company’s financial guidance for fiscal year 2024, ZBH forecasts revenue between 3.5%-4%. The company also expects adjusted diluted EPS to be between $7.95 and $8.05.

Street expects ZBH’s revenue for the fiscal fourth quarter (ending December 2024) to increase 3.9% year-over-year to $2.02 billion. Its EPS for the same period is expected to register a 4.3% growth from the prior year, settling at $2.30. In addition, it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is excellent.

ZBH’s normalized net income has grown at CAGRs of 8.7% and 3.8% over the past three and five years, respectively. Likewise, the company’s levered FCF has increased at a CAGR of 2.2% over the past five years.

ZBH’s stock has surged 5.2% over the past month to close the last trading session at $110.17.

ZBH’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has a B grade for Growth and Value. Within the same industry, it is ranked #17 out of 328 stocks. Click here to see ZBH’s ratings for Momentum, Stability, Sentiment, and Quality.

What To Do Next?

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SYK shares were trading at $369.10 per share on Thursday afternoon, up $0.08 (+0.02%). Year-to-date, SYK has gained 24.10%, versus a 26.40% rise in the benchmark S&P 500 index during the same period.