On Tuesday, a Needham analyst reiterated a Hold rating on Zimmer Biomet Holdings Inc (NYSE:ZBH) stock. The company was experiencing difficulties with shipping products due to problems that had arisen during the implementation of a new enterprise resource planning (ERP) software. The issues primarily affect the company's Sports Medicine, Extremities, and Trauma (SET) business segment.
Management disclosed at an investor conference on September 5, 2024, that these challenges are anticipated to negatively impact Zimmer Biomet's revenue for the year 2024 by approximately 1%.
This translates to an estimated 2% reduction in revenue growth for the second half of 2024, with more than half of the impact expected in the third quarter of 2024.
While the exact effect on the company's earnings per share (EPS) for the latter half of 2024 remains unquantified, management has communicated their intention to mitigate a portion of the impact.
In light of these developments, Needham has adjusted its financial forecasts for Zimmer Biomet, lowering both revenue and EPS estimates for the fiscal years 2024 and 2025.
Despite the setback, Needham projects that Zimmer Biomet will recoup most, though not all, of the lost SET revenue in the fiscal year 2025. Consequently, Needham has reiterated its Hold rating on Zimmer Biomet shares, maintaining a cautious stance until the company fully addresses the shipping and revenue challenges presented by the ERP software implementation.
In other recent news, medical device company Zimmer Biomet is facing a downward adjustment in earnings forecasts due to anticipated disruptions from its enterprise resource planning (ERP) system. Truist Securities has reduced its price target for the company to $112, while maintaining a Hold rating.
Concurrently, Canaccord Genuity (TSX:CF) has also maintained a Hold rating but reduced its price target to $115. TD (TSX:TD) Cowen, on the other hand, adjusted the price target to $119, also maintaining a Hold rating. Stifel has maintained a Buy rating for Zimmer Biomet, setting the price target at $130.
These adjustments follow recent statements from Zimmer Biomet's management indicating that the ERP disruptions are expected to affect the company's performance in the second half of 2024.
Despite these challenges, Zimmer Biomet has completed a $700 million financial transaction involving the issuance of notes due in 2034 and is set to acquire AI-driven surgical guidance firm OrthoGrid Systems. These are the recent developments for Zimmer Biomet.
InvestingPro Insights
As Zimmer Biomet Holdings Inc (NYSE:ZBH) navigates the complexities of its new ERP software impacting its SET business segment, investors may find value in the latest data and insights. According to InvestingPro, Zimmer Biomet has been actively managing its share count, with management aggressively buying back shares, signaling confidence in the company's value proposition. Despite recent challenges, the company's stock is trading at a low P/E ratio relative to near-term earnings growth, which could indicate an attractive valuation for investors considering long-term potential.
Furthermore, Zimmer Biomet has demonstrated a commitment to shareholder returns, having maintained dividend payments for 13 consecutive years. While analysts have revised their earnings downwards for the upcoming period, the company is still predicted to be profitable this year and has been profitable over the last twelve months. With a market capitalization of $21.88 billion and a P/E ratio of 17.49 for the last twelve months as of Q2 2024, Zimmer Biomet's financial stability is also reflected in its gross profit margin of 71.79% during the same period.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available, offering deeper insights into Zimmer Biomet's financial health and market position. Visit InvestingPro for more information on these valuable tips.
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