Argus Upgrades Zimmer Biomet To Buy

Following the upbeat 2016 guidance issued by Zimmer Biomet Holdings Inc ZBH, Argus’ David Toung believes the company has been able to overcome integration issued associated with the merger with Biomet, while the combined sales force has stabilized.

Toung upgraded the rating on the company from Hold to Buy, with a price target of $140.

Upbeat Guidance

According to the Argus report, “The merged company is driving sales growth through new product launches and benefiting from greater stability in the volume of surgical procedures.”

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Zimmer Biomet has raised its adjusted EPS guidance for 2016 from $7.80–$7.95 to $7.85–$8.00, while also raising its operational sales growth guidance from 1.5–2.5 percent to 2.0–3.0 percent.

“The company projects accelerating top-line growth as it expands its sales force and invests in medical training for surgeons using its implants. It is also driving sales growth through the launch of new products,” Toung mentioned.

Driving Sales Growth

Zimmer Biomet expects sales growth through the remainder of 2016 to be driven by the 50 new products that management intends to launch during the year, including products for hip and knee reconstructive systems.

Twelve of these 50 products have already been released in 1Q, Toung pointed out.

Apart from this, management is also working on stabilizing and expanding the combined sales force, while investing in medical education and cross training.

Based on the revised guidance and the robust 1Q16 performance, the EPS estimates for 2016 and 2017 have been raised.