Canaccord Genuity has maintained a Hold rating on Zimmer Biomet (NYSE: ZBH) but reduced the price target to $115 from $120.
The adjustment comes in response to the company's recent announcement of challenges with its Enterprise Resource Planning (ERP) system implementation.
These difficulties are expected to potentially affect up to 1% of the firm's fiscal year 2024 sales.
Zimmer Biomet identified that the ERP challenges are primarily impacting its business in the United States and Canada and have affected the Other and SET product segments. Despite these issues, the company believes the impact can be contained within the 2024 fiscal year.
The new price target of $115 reflects a 13.3 times multiple on the projected 2024 earnings per share (EPS), which represents a 58% discount to the mean of Canaccord Genuity's broad large-cap MedTech group, excluding the highest and lowest figures.
The discount has been increased to better align with Zimmer Biomet's current share price, supporting the firm's decision to maintain a Hold rating on the stock.
Canaccord Genuity's price target is based on a detailed analysis, including applying a larger discount to the comparison group's average, resulting in a lower target that is closer to the company's current trading level. The forecasted 2025 pro forma EPS of $8.65 was used as a basis for the valuation.
Zimmer Biomet has faced challenges following a transition to a new Enterprise Resource Planning (ERP) system. The issue, identified by TD Cowen, has led to a price target cut to $119 and is expected to affect 1% of sales in 2024.
Despite this, Zimmer Biomet is confident in resolving the issue by the end of the year. Stifel maintains a Buy rating and a price target of $130 for the company, while Canaccord Genuity reduced its price target to $120, both due to the ERP transition issue.
Zimmer Biomet has also completed a $700 million financial transaction involving the issuance of notes due in 2034. This move provides additional capital for the company. Furthermore, Zimmer Biomet is set to acquire OrthoGrid Systems, a firm specializing in AI-driven surgical guidance, which will enhance its technological capabilities.
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