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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (79016)

2/10/2026 7:54:26 AM

From: E_K_S

Read Replies (1) of 79146

RE: Zimmer Biomet Holdings (ZBH) - earnings

Looks our recent Buys are going to pay off on Forward PE. Still at a 50% position and may add at/near $90/share. ZBH offers compelling value at 10.6x forward earnings with a 6.6% FCF yield

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Zimmer Biomet (ZBH) Q4 2025 Earnings Summary Quarterly Results (Q4 2025):

Revenue reached $2.244 billion, up 10.9% reported (9.2% constant currency, 5.4% organic) PR Newswire
Adjusted EPS of $2.42, up 4.8% year-over-year PR Newswire
GAAP EPS of $0.70, down 41.7% PR Newswire (impacted by restructuring and acquisition costs)

Full Year 2025 Performance:

Total revenue of $8.232 billion, up 7.2% reported (6.4% constant currency, 3.9% organic) PR Newswire
Adjusted EPS of $8.20, up 2.5% PR Newswire
Free cash flow of $1.172 billion Stock Titan

Segment Performance (Q4):

Knees: 8.6% growth (6.9% constant currency)
Hips: 6.8% growth (4.9% constant currency)
S.E.T.: 20.1% growth (organic 2.9%, boosted by Paragon 28 acquisition)

Key Strategic Moves:

Board approved new $1.5 billion share buyback authorization Stock Titan
$250 million repurchased in Q4 2025 PR Newswire
Transitioning to predominantly direct and specialized U.S. sales organization

ZBH 2026 Valuation Proposition 2026 Guidance:

Adjusted EPS: $8.30-$8.45 Investing.com (midpoint $8.375)
Revenue growth: 2.5%-4.5% reported (2.0%-4.0% constant currency; 1.0%-3.0% organic)

Current Valuation Metrics: Stock Price: $88.65 (as of Feb 9, 2026) Robinhood
Market Cap: $17.7 billion Robinhood

P/E Ratios:

Trailing P/E: 22.25 Robinhood
Forward P/E: 10.53 GuruFocus (based on 2026 guidance)

2026 Forward P/E: $88.65 / $8.375 = 10.6x

Free Cash Flow Analysis:

2025 FCF: $1.172 billion Stock Titan
FCF Yield: $1.172B / $17.7B = 6.6%
Projected 2026 FCF growth expected given operational improvements and lower integration costs

Growth Profile: Expected CAGR (2025-2026):

EPS Growth: $8.20 to $8.375 (midpoint) = 2.1% CAGR
Revenue Growth: 2.5%-4.5% reported = ~3.5% CAGR (midpoint)

Longer-term growth drivers:

New product cycle ("Magnificent 7" launches)
ROSA Knee robotics platform expansion
Paragon 28 foot & ankle integration
U.S. sales reorganization (short-term headwind, long-term benefit)

Valuation Summary:
MetricValueAssessment<tbody]

2026 Forward P/E	10.6x	Attractive vs. peers (discount to sector average PE of 34.55)
FCF Yield	6.6%	Strong cash generation
Expected EPS CAGR	~2%	Modest near-term growth (depressed by sales reorganization)
Expected Revenue CAGR	~3.5%	Below historical but improving post-restructuring
Analyst Price Target	$102.74 average FinancialContent	16% upside from current levels

Investment Considerations: Positives:

Deeply discounted valuation (10.6x forward P/E vs. 34.55x sector average)
Strong FCF generation with 6.6% yield
$1.5B buyback authorization provides support
Innovation cycle accelerating with new products gaining traction

Headwinds:

U.S. sales reorganization tempering 2026 guidance PR Newswire
Integration costs from Paragon 28 and Monogram acquisitions
Modest near-term EPS growth of ~2%

Verdict: ZBH offers compelling value at 10.6x forward earnings with a 6.6% FCF yield. The stock trades at a significant discount to healthcare equipment peers, presenting opportunity for patient investors willing to look through near-term sales reorganization headwinds toward improved execution in 2027+.

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