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XLV Manages to Stay above $70 despite Market Turmoil

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Part 4
XLV Manages to Stay above $70 despite Market Turmoil PART 4 OF 5

Zimmer Biomet Prices Its Secondry Offering, Stock Goes Down

Zimmer fell by 1.2%

On June 14, 2016, Zimmer Biomet (ZBH) was one of the underperforming stock within the Health Care Select Sector SPDR ETF (XLV). It fell by 1.2%. It also underperformed the SPDR S&P 500 ETF (SPY). SPY fell by 0.2%.

Zimmer Biomet Prices Its Secondry Offering, Stock Goes Down

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Zimmer Biomet went down as it priced its secondary offer 2% lower than the closing price as of June 13, 2016. It priced its secondary offer at $115.85 per share. In a press release, Zimmer announced “the pricing of the previously announced underwritten secondary offering of 11,116,533 shares of its common stock by certain of its stockholders, consisting of affiliates of KKR, Goldman Sachs and TPG. The shares are being sold to the public at an initial price of $115.85 per share. The selling stockholders will receive all of the proceeds of the offering. Neither Zimmer Biomet nor any of its directors, officers or other stockholders is selling any shares of common stock in the offering. The closing of the offering is expected to occur on June 16, 2016, subject to the satisfaction of customary closing conditions.”

Zimmer Biomet closed at $116.82 and traded below the 20-day moving average price of $120.4. Zimmer Biomet recorded higher trading volumes of ~6.2 million shares—compared to the three-month average trading volume of ~1.4 million shares per day. The stock rose by 13.9% on a year-to-date basis. As of the closing price on June 14, the stock is trading at a 2016 forward price-to-earnings multiple of 14.70x. Zimmer Biomet has a book value of $48.52 per share. At its current price, the stock is trading at a price-to-book value of 2.40x. Some of its other peers such as Thermo Fisher Scientific (TMO) and Amerisource Bergen (ABC) are trading at a price-to-book value of 2.80x and 7.70x, respectively. Zimmer Biomet has a weight of 0.8% in XLV’s portfolio.

Analysts’ expectations and recommendations

Analysts expect Zimmer Biomet’s 12-month target price to be at $127.80. It’s important to note that 20 analysts recommended the stock as a “buy.” Ten analysts recommended the stock as a “hold” and one analyst recommended the stock as a “sell.”

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