Zimmer Biomet upgraded at Piper Sandler citing conservative guidance

Zimmer Biomet (NYSE:ZBH) trended higher in the pre-market trading Friday after Piper Sandler upgraded it to Overweight from Neutral, arguing that the orthopedic product manufacturer has issued conservative guidance amid a growing joint market.

The analyst Matt O'Brien has come out of the 2023 Meeting of the American Academy of Orthopaedic Surgeons with positive remarks from companies and clinicians about the subsector.

Based on AAOS feedback, O'Brien expects the global procedural volumes in orthopedics to continue the upward trend throughout 2023 after a "very strong" start in the first two months.

"With roughly 70% of sales coming from hip and knee implants, we believe ZBH will be a disproportionate winner from this dynamic," the analyst wrote.

Additionally, O'Brien notes that the company has issued conservative revenue guidance for the year," indicating 3% – 5% revenue growth, which, if beaten, could result in "much better EPS results this year."

"We anticipate this momentum will carry into '24 as well, which could lead to earnings upside next year, too, pushing the stock even higher from here," the analyst added, raising the price target on the stock to $145 from $135 per share.

Risks to the thesis are staffing challenges at hospitals which could hurt procedure volumes and a threat to ZBH's market share if Johnson & Johnson (JNJ) launches its Velys robot over the next few quarters.

Read why Seeking Alpha contributor Stephen Simpson reaffirmed his Hold rating on Zimmer Biomet (ZBH) in February even after the company exceeded Street forecasts with its Q4 2022 results.