2023-05-03 09:21:30 ET
BofA Securities has upgraded Zimmer Biomet (ZMH) to neutral from underperform after its Q1 2023 EPS results beat and it raised its guidance .
The firm also upped its price target to $160 from $120 (~12% upside based on Tuesday's close).
Analyst Travis Steed said the company's EPS upside is likely to continue as backlog is just starting to ease "suggesting a longer tail on the revenue upside."
He added there is a $3B-$4B in potential backlog revenue for the hip and knee procedure market and "if ZBH is able to capture $1bn of this over the next few years it would suggest an additional $1.50+ in EPS and ZBH would be approaching $10 in total EPS in a few years."
Steed estimates Zimmet Biomet ( NYSE: ZBH ) has a 35% share of the hips market and a 40% range for knees.
Regarding M&A, management has said that in the near term, it is focused on small- to mid-sized deals. "It’s clear to us ZBH wants to diversify and has the M&A fire power but it also seems clear ZBH will take time to execute and build even more credibility with investors before moving too big and too far afield."
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Zimmer Biomet upgraded to neutral at BofA on EPS upside