This medical and surgical products company beat earnings estimates by a nickel last quarter. Current forecasts are 15.5% growth for 2017.
Zimmer Biomet Holdings (ZBH)
From Cabot Benjamin Graham Value Investor
Zimmer Biomet Holdings (ZBH; Max Buy Price 127.87) designs, manufactures and markets a variety of medical and surgical products for orthopedic reconstruction, sports medicine, trauma, and spine, bone, craniomaxillofacial and thoracic healing. In addition, it makes biologics and dental implants. Zimmer’s products and solutions help treat patients suffering from bone, joint and soft tissue disorders and injuries.
Zimmer’s merger with Biomet is producing better-than-expected results. Cost savings are boosting earnings while accelerating demand in the musculoskeletal industry is enhancing sales. The industry will continue to profit from aging citizens in the U.S. and around the world.
Revenue soared 44% and EPS soared 52% during the 12 months ended September 30, 2016. Zimmer Biomet now commands 17% of the musculoskeletal market, while cross-selling opportunities will boost market share further. The combined company will also benefit from considerable spending increases in research and development.
Zimmer recently purchased two smaller healthcare companies. The purchase of Ortho Transmission will strengthen the company’s limb prosthesis offerings, and its Cayenne Medical takeover will enhance Zimmer’s sports medicines.
At 16.3 times current EPS, ZBH shares are selling at a bargain price, especially considering sales and earnings growth will likely accelerate. The balance sheet is solid, and the dividend, while small, will likely receive regular increases during the foreseeable future. I expect the company’s stock price to climb 31% to reach my Min Sell Price of 167.91 within 12 to 18 months. Buy at 127.87 or below.
J. Royden Ward, Cabot Benjamin Graham Value Investor, www.cabot.net, 978-745- 5532, October 6, 2016