Piper Jaffray & Co. Analyst Matt Miksic says he sees significant room for Zimmer Holdings, Inc. (ZMH) to grow over the next year. He says Zimmer’s volumes didn’t increase from the fourth quarter of 2013 to the first quarter of 2014 due to seasonality, but he expects growth to improve in 2014 and again in 2015.
“It hinges on the turning-the-corner call that we have been making now for almost two years,” Miksic says. “The stock did well in 2012, and then performed substantially better than the market in 2013, ending the year with some of the best growth rates in U.S. knees we have seen in four to five years.”
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Zimmer has the best exposure to hips and knees compared to other orthopedic manufacturers, Miksic says. He says the company also has a significant amount of fixed assets and manufacturing leverage focused on its hip and knee business lines. As a result, Miksic says Zimmer is his best call in the sector, but he also sees upside for other orthopedic manufacturers.
“I would say that if the market continues to improve, it would probably be silly not expect the rising tide to lift all boats in orthopedics, including Stryker (SYK) and Smith & Nephew (SNN),” Miksic says.
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