Verizon Communications Inc.

VZ Details

Verizon Communications Inc. (NYSE: VZ) is engaged in providing communications, information and entertainment products and services. Its operating segments are 1) Verizon Consumer Group which provides wireless and wireline communications services primarily to individual consumers, and 2) Verizon Business Group, offers wireless services such as data, video, and conferencing services, corporate networking solutions, security and managed network services, local and long-distance phone services, and others to business and government customers and wireline carriers across the US. As of October 19, 2021, the company's market capitalization stood at USD 216.74 billion.

Latest News:

• Debt Redemption: On October 13, 2021, VZ announced the redemption of its USD 477.60 billion aggregate principal amount of 4.15% Notes Due 2024, on November 12, 2021, along with accrued and outstanding interest

• Issue of Green Bonds:  On September 08, 2021, VZ priced its third USD 1.0 billion green bond offering issued on September 03, 2021. Net proceeds from this issue are projected to be committed solely to renewable energy, as the company has signed long-term virtual power purchase agreements (VPPAs) that support the construction of solar and wind power facilities. Loop Capital is acting as a lead underwriter for this issue.

Q2FY21 Results:

• Double Digits Growth in Topline: The company reported YoY growth of 10.89% in revenues to USD 33.76 billion during Q2FY21 (ended June 30, 2021) from USD 30.45 billion during Q2FY20. The Service revenues and other segment which accounted for 83.58% of the total revenue in Q2FY21, reported YoY growth of 5.73%, whereas the wireless equipment revenues improved by 47.62% YoY.
• Expansion of Net Income: The company's net income increased to USD 5.95 billion in Q2FY21 from USD 4.84 billion in Q2FY20.
• Cash and Debt Position: As of June 30, 2021, the company had cash and cash equivalents of USD 4.66 billion and total debt of USD 151.92 billion.

Risks:

• Vendor Concentration Risk: VZ is dependent on a limited number of vendors and suppliers for its key equipment needs. In addition, it depends on a single vendor for the chipset used in the manufacture of its smartphone and other devices. Therefore, any failure to meet any contractual obligation by these third parties could harm its operations.

Outlook:

In FY21, VZ expects YoY growth of 3.5% - 4% in its wireless service revenue, along with an adjusted EPS in the range of USD 5.0 – 5.15. It also expects to incur a capital expenditure of USD 17.5 – 18.5 billion for FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation   

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VZ Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

VZ's share price has decreased 10.34% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 50.86 to USD 61.95. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 38.30. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 61.39.

Considering the correction in the stock price in the past nine months, encouraging outlook, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 52.35, down 0.85% as of October 19, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

Zimmer Biomet Holdings, Inc,

ZBH Details

Zimmer Biomet Holdings, Inc. (NYSE: ZBH) is a company that develops, manufactures, and sells orthopedic reconstructive goods such as sports medicine, biologics, extremities and trauma products, and other related items. In the United States, Europe, and Japan. ZBH has the largest share of the reconstructive market. The company's market value was USD 31.10 billion on October 19, 2021.

Latest News:

• Key Additions to the leadership team: ZBH announced significant leadership appointments to the "NewCo" executive team on September 14, 2021, including Richard J. Heppenstall as Executive Vice President and Chief Financial Officer (CFO). The Spine and Dental companies will be spun out under the name ZimVie, according to ZBH. In addition, in February 2021, ZBH announced its intention to create a new independent, publicly listed business to allocate resources better and achieve market leadership. The deal is still on track, with a completion date set for mid-2022.
• Dividend Declaration: On September 03, 2021, ZBH declared a quarterly cash dividend of USD 0.24 per share, which will be paid on October 29, 2021, to shareholders of record on September 30, 2021.

H1FY21 Results:

• The surge in Revenues: The firm reported a rise of 28.72% in net sales to USD 3.87 billion during H1FY21 (ended June 30, 2021) compared to USD 3.01 billion during H1FY20, due to Changes in volume and mix of product sales.
• Increase in Bottomline: It reported a significant increase in net income to USD 340.2 million during H1FY21 vs. a net loss of USD 717.3 million reported in H1FY20.
• Increase in Cash Position: Cash flow from operations in H1FY21 increased to USD 700.4 million compared to USD 398.1 million during H1FY20.
  

Key Risks:

• Dependence on Third-Party Key Payors: ZBH sells its goods and services to hospitals, doctors, and other healthcare providers reimbursed by third-party payors such as domestic and foreign government programs, private insurance plans, and managed care programs the healthcare services they offer to their patients. As a result, demand for ZBH's goods may drop if third-party payors in government healthcare systems refuse to compensate their clients for the items or lower payment levels, resulting in a decline in financial condition.
• Supplier Concentration Risk: Some of the company's key components and raw materials are sourced from a single supplier. As a result, any delay in obtaining the required amount or unfavorable costs might skew its output, severely harming its overall operational state of affairs.

Outlook:

• Revenue Guidance: ZBH expects its FY21 revenues to increase by 14.5-16.5% compared to FY20.
• Adjusted Operating Profit Margin: It further anticipates its Adjusted Operating Profit Margin to be in the range of 26.5-27.0%.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ZBH Daily Technical Chart (Source: REFINITIV) 

Stock Recommendation:

ZBH' share price has fallen 14.32% in the past six months and is currently leaning towards the mid-band of the 52-week range of USD 130.05 to USD 180.36. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 54.75. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 175.62.

Considering the significant dip in the stock price, strong track record, constant dividend yield, improvement in profitability margin, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 148.92, up 2.72% as of October 19, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.

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