Zimmer Biomet (ZBH) PT Raised to $185 at Jefferies Post Spin Detail

Jefferies analyst Raj Denhoy raised the price target on Zimmer Biomet (NYSE: ZBH) to $185.00 (from $175.00) after the company reported $2.1bn for -3.7%cc and $2.11, both inline with lowered expectations following recent company commentary; commentary around 1Q suggests things remain tough and 2021 guidance wasn't given. However, the bigger news was the announced spin of Spine and Dental in mid-22 which still leaves questions regarding the timing and structure but the game is accelerating growth, re-rating the valuation higher which is occuring.

The analyst reiterated a Buy rating, stating "The big news today was ZBH's intention to spinoff the company's Spine and Dental businesses. While not surprising, the timing and structure are sure to be debated. The spin was noted as driving a 50bp increase in ZBH's growth profile—suggesting the increase in multiple that might accrue is minimal. The spin as opposed to a sale and the fact that the two companies' capital structures are not finalized leaves open questions on how this structure will help ZBH swap the assets being spun for faster growing segments. ZBH confirmed there could be a dividend paid by the NewCo back to ZBH, though the exact structure remains unclear. Regardless, it seems ZBH will be constrained to smaller, tuck in deals (which is what it has said it was committed to) until the deal is done".

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