Jefferies analyst, Raj Denhoy, reiterated his Buy rating on shares of Zimmer Biomet (NYSE: ZBH) after a review of 2Q growth rates for the ortho players shows that ZBH made tangible progress in closing the gap between the company's growth and the market. After adjusting for selling day differences, acquisitions, and currency, knees grew ~4.5% and hips ~2.1% globally in 2Q; Zimmer grew ~3.1% and ~1.3%. This was the tightest performance relative to the market since the Biomet deal closed and more evidence that the company should not trade at the discount it does.

Zimmer trades at a discount to its medtech peers, partially on the company’s underperformance in its core hip and knee markets post the Biomet acquisition. However, as the table below shows, the company has improved its underlying orthopedic performance relative to the market in each of the last two quarters. In 2Q, the market slowed but Zimmer’s delta to overall market growth was just -0.8% in hips and -1.4%% in hips, improving from -2.3% and -1.8% in 1Q. The analyst's positive view on shares is predicated on: 1. a return to market growth; 2. the company’s access to cash and its willingness to deploy it in positive ways; and 3. the still discounted valuation for ZBH shares.

No change to the price target of $150.

For an analyst ratings summary and ratings history on Zimmer Biomet click here. For more ratings news on Zimmer Biomet click here.

Shares of Zimmer Biomet closed at $131.06 yesterday.