Shares of Zimmer Holdings, Inc. (ZMH) achieved a new 52-week high of $117.19 on Jan 5. The bullish run reflects the company's focus regular product launches, the strategic acquisition of Biomet and impressive third-quarter 2014 results.
The company's shares eventually closed at $116.79 on the day, translating into a decent one-year return of around 25%. The year-to-date return on the stock is roughly 3%. Currently, this Warsaw, IN-based company, which is a leading player in the musculoskeletal space, has a market cap of $19.8 billion while average volume of shares traded over the past one day is roughly $1 million.
Over the last few months, Zimmer has been in the news for the launch of novel products and varied achievements, as well as the strategic acquisition of Biomet that the company decided to pursue in Apr 2014. The aim is essentially to expand geographical reach and diversify the company's product portfolio.
In Nov 2014, Zimmer Spine's Virage OCT Spinal Fixation System, used as a posterior implant for the Occipital-Cervical-Thoracic spine, won the prestigious Life Science Alley Award. We believe this award has bolstered Zimmer's pioneering position in the medical, biotech as well as health IT space, across the entire Minnesota area.
Earlier, in the same month, Zimmer Spine's Optio-C Anterior Cervical Plate, a next generation modular stand-alone cervical device used in cervical fusion surgeries, won the FDA 510(k) approval. This indicates Zimmer's dedication toward creating an assortment of revolutionary spine products that will help it retain its leadership position in the spine innovation space.
Evidently, since Jan 2014, Zimmer Spine has launched 12 products, the most recent ones being Virage OCT Spinal Fixation System and the Optio-C Anterior Cervical System.
With the grand $13.35 billion acquisition of Biomet, Zimmer expects to create a market leader in the $45 billion musculoskeletal industry thereby improving the merged entity's position in the competitive niche. Per management, upon completion, the transaction is expected to be accretive to Zimmer's adjusted earnings per share in double digits in the first year. Moreover, by the third year, net annual synergies should reach approximately $270 million with roughly $135 million anticipated in the first year itself.
The combined entity will also likely generate operating cash flow of more than 1.5 times Zimmer's stand-alone estimates. Zimmer expects to complete this takeover by the first quarter of 2015.
Meanwhile, the company reported decent third-quarter 2014 results on Oct 23, 2014, with earnings of $1.35 per share, ahead of the year-ago equivalent by 8%. The bottom line also exceeded the Zacks Consensus Estimate by 3.8%. On the other hand, revenues increased 2.9% year over year to $1.11 billion, exceeding the Zacks Consensus Estimate of $1.10 billion.
Zacks Rank
Currently, Zimmer carries a Zacks Rank #4 (Sell). Better-ranked medical product stocks worth considering include ICU Medical, Inc. (ICUI), INSYS Therapeutics, Inc. (INSY) and Conatus Pharmaceuticals Inc. (CNAT). While ICU Medical sports a Zacks Rank #1 (Strong Buy), Conatus Pharmaceuticals and INSYS Therapeutics hold a Zacks Rank #2 (Buy).
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