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Can Zimmer Biomet Recover after Disappointing 3Q17?

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Part 10
Can Zimmer Biomet Recover after Disappointing 3Q17? PART 10 OF 10

What’s behind Zimmer Biomet’s Recent Stock Downtrend?

ZBH’s stock performance

Zimmer Biomet Holdings (ZBH) ended trading at $108.70 on November 7, 2017. Currently, ZBH stock’s 50-day moving average stands at $117.60 and its 200-day moving average is $120.10. On November 14, 2016, ZBH registered its 52-week low of $95.63. The stock was trading at its 52-week high of $133.49 on July 17, 2017.

Although ZBH stock has recovered since the stock price lows at the end of 2016, it has seen a recent slump in prices due to weak investor sentiment triggered by its disappointing quarterly results in 3Q17. The company’s earnings results have been dismal for the last three quarters due to a production issue at its Warsaw facility. Thus the supply constraints led to a lower-than-expected performance.

What’s behind Zimmer Biomet&#8217;s Recent Stock Downtrend?

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Year to date, ZBH stock has risen 5.8%, but in the past six months, it has fallen 6.6%.The stock has fallen 8.5% in the last three months. On November 1, 2017, the stock fell more than 6% as the company announced lower-than-expected results for the quarter and decreased the company’s 2017 guidance. For the last week, the stock has been on a downward trajectory, registering returns of -10%.

As of November 8, 2017, the stocks of peers Stryker (SYK), Medtronic (MDT), and Smith & Nephew (SNN) have returned 33.5, -5.3%, and 29.2%, respectively, over the last 12 months.

Comparisons with industry and market performances

Over the last year, Zimmer Biomet Holdings has returned ~6%. That can be compared to the market performance represented by the SPDR S&P 500 Index (SPY). SPY has returned 24.2%. ZBH has clearly underperformed the market by huge margins over the last year.

Now let’s compare the performance of ZBH stock to the performance of the iShares US Medical Devices ETF (IHI), which represents the industry in which ZBH operates. We see that ZBH stock has lagged far behind the broader industry average for the past year. IHI has returned ~29% over the past 12 months.

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