FDA Passes Zimmer Biomet's (ZBH) Zhejiang Facility Issue

Zimmer Biomet Holdings, Inc. ZBH revealed with a sigh of relief, that the U.S. Food and Drug Administration (FDA) has finally resolved the long-standing issue related to the company's Zhejiang, China manufacturing facility.

According to the musculoskeletal major, the FDA has closed out its ‘Warning Letter' related to this Chinese manufacturing facility. The issue dates back to Jun 2015.

Zimmer Biomet is extremely positive about this incident to indicate the company's uncompromised quality and operational journey.

We believe this development should not just help the company regain goodwill in the market but the successful run of the Chinese manufacturing facility should also help it boost the profit margins by curtailing operating expenses.

Additionally, the latest development should also add an impetus to the company's emerging market growth trajectory. In the recent past, Zimmer has been working hard to strengthen its foothold in the emerging markets to acquire long-term growth opportunities.

The company's strategic investments in these regions to improve operational and sales performance for the past several quarters are yielding results.

While the integration of Biomet is over, the combined company has started benefitting from a strong presence in the emerging markets with an extended portfolio that includes upper and lower joints.

Zimmer Biomet expects to establish a critical mass in both spine and dental departments to position it well to compete effectively and gain a plum share in these significant markets.

Opportunity from emerging markets is expected to grow to $10 billion by 2018 for the Reconstructive and Trauma areas. Also, despite the recent global economic downturn massively affecting Zimmer Biomet's business in Latin America, other regions like Asia Pacific and EMEA continue to drive growth under the periphery of Zimmer Biomet's business.

Price Performance

In the last three months, Zimmer Biomet has been trading below the Zacks categorized Medical - Products industry on factors like macroeconomic uncertainties, pricing pressure and unfavorable currency fluctuations. The stock till now has lost 4.2%, wider than the broader industry's 2.8% decline.

Zacks Rank & Key Picks

Zimmer Biomet currently carries a Zacks Rank #3 (Hold). Few better-ranked medical stocks are Align Technology, Inc. ALGN, Inogen, Inc. INGN and Accelerate Diagnostics, Inc. AXDX. While Align Technology and Inogen sport a Zacks Rank #1 (Strong Buy), Accelerate Diagnostics carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock has roughly added 30.9% in the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of around 88%.

Accelerate Diagnostics has an expected long-term adjusted earnings growth of 30%. The stock has added roughly 20% in the last three months.

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