On Friday, Truist Securities adjusted its outlook on Zimmer Biomet (NYSE:ZBH), a medical device company, by reducing its price target to $112 from $117 while maintaining a Hold rating on the company's shares. The revision follows recent statements from the company's management at investor conferences, indicating that enterprise resource planning (ERP) disruptions are anticipated to affect Zimmer Biomet's performance in the second half of 2024.
The analyst at Truist Securities has revised the company's earnings per share (EPS) forecasts for the years 2024 to 2026, with an approximate $0.09 decrease, due to the expected revenue downturn in the latter half of 2024. This anticipated decline in revenue is also projected to carry over into subsequent years, affecting the company's earning potential.
The new price target of $112 reflects both the anticipated earnings impact and the application of a slightly lower multiple. Despite the reduction in the price target, Truist Securities reaffirms its Hold rating on Zimmer Biomet's stock. This indicates a neutral stance on the stock, suggesting that the firm does not see significant upside or downside from the current share price.
The analyst's statement provided insight into the decision, "We're adjusting our model to reflect recent management commentary at investor conferences around ERP disruptions expected to impact ZBH in 2H24. Our 2024-2026E EPS forecasts move ~$0.09 lower given the call down of revenue in 2H24 (the lost earnings power flows through to the out years as well) and, combined with a slightly lower multiple, leads us to lower our PT to $112 (vs. $117); Reit. HOLD."
InvestingPro Insights
As Zimmer Biomet (NYSE:ZBH) faces challenges with its enterprise resource planning, it's important for investors to consider a range of metrics and insights that can provide a broader context for the company's current valuation and future prospects. According to InvestingPro data, Zimmer Biomet boasts a market capitalization of $21.41 billion and is trading at a P/E ratio of 21.82, with an adjusted P/E ratio over the last twelve months as of Q2 2024 standing at 17.12. This suggests a valuation that could be attractive relative to near-term earnings growth, as the company's PEG ratio over the same period is a low 0.21.
InvestingPro Tips highlight that management's aggressive share buyback strategy could be a sign of confidence in the company's value. Additionally, despite 8 analysts revising their earnings downwards for the upcoming period, Zimmer Biomet has sustained dividend payments for 13 consecutive years, which may appeal to income-focused investors. The company's stock is also trading near its 52-week low, which could indicate a potential entry point for investors seeking to capitalize on future profitability, as analysts predict the company will maintain profitability this year.
For those seeking more detailed analysis and additional insights, there are over 7 InvestingPro Tips available, which can be explored further on the InvestingPro platform. These tips can provide investors with a comprehensive understanding of Zimmer Biomet's financial health and investment potential.
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