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Will This Upgrade Help Zimmer Holdings (ZMH) Stock Today?

Story updated at 9:45 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Zimmer Holdings (ZMH) was upgraded to "strong buy" from "hold" by Needham Wednesday.

Zimmer gained 0.1% to $101.38 in morning trading.

Needham analysts said Zimmer's Biomet acquisition should add to earnings. The firm said that both companies can gain market share in the next year.

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Separately, TheStreet Ratings team rates ZIMMER HOLDINGS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ZIMMER HOLDINGS INC (ZMH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the Health Care Equipment & Supplies industry average, but is less than that of the S&P 500. The net income increased by 1.3% when compared to the same quarter one year prior, going from $218.60 million to $221.50 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ZMH's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.75, which clearly demonstrates the ability to cover short-term cash needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 27.12% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ZMH should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • You can view the full analysis from the report here: ZMH Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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