Zimmer Biomet, one of the world's largest makers of orthopedic implants, has raised its 2026 adjusted profit forecast for the second straight quarter. But analysts at RBC Capital Markets caution that the company's near-term growth is still being held back by weakness in China and a softer-than-expected knee-replacement business.
The company now expects 2026 adjusted earnings per share (EPS) of $8.50 to $8.60, up from its prior range of $8.47 to $8.59. That's a modest bump, but it signals management's confidence that the business can deliver better results next year. Adjusted EPS is a common measure that strips out one-time items and other costs, giving investors a clearer view of ongoing profitability.
China remains a drag
RBC estimates that China shaved about 1 percentage point off Zimmer Biomet's third-quarter sales growth. That's a meaningful hit for a company that relies on international markets for a large share of its revenue. The bank expects China to be a smaller drag on full-year 2026, with pressure starting to ease in early 2027.
China has been a challenging market for many medical-device companies in recent years, due to government pricing pressures and slower hospital spending. For Zimmer Biomet, the headwind has been a key reason why its overall growth has lagged some peers.
Management's bull case for 2027 rests on three pillars: improving performance in China, a maturing sales-force revamp that began in 2026, and a full year of contribution from Paragon 28, a foot-and-ankle devices business that RBC says is growing in the high teens. Paragon 28 was acquired by Zimmer Biomet in 2025, and its fast-growing product line is expected to add to overall revenue next year.
What the price target change means
RBC raised its price target on Zimmer Biomet shares to $125 from $110, even though it only modestly increased its earnings estimates. The stock was trading around $106 at the time of the note.
At $125, and using the midpoint of the company's 2026 EPS guidance ($8.55), investors would be paying roughly 14.5 times those earnings. At the current price of $106, the multiple is about 12.4 times. That gap is essentially a valuation call: RBC is betting that the market will be willing to pay a richer price for each dollar of Zimmer Biomet's profit.
Multiple-driven upgrades can be powerful, but they come with a catch. They depend on the next chapter of the story arriving on schedule. If China headwinds don't fade as expected, or if the 2027 growth pickup doesn't show up clearly, it becomes harder to justify that higher valuation.
What it means for investors
For everyday investors, the key takeaway is that Zimmer Biomet is a company in transition. It's making progress on its profit outlook, but the near-term growth story is still clouded by external pressures. The company's ability to hit its 2027 targets will likely determine whether the stock can reach RBC's new price target.
It's also worth noting that Zimmer Biomet is not alone in facing China-related headwinds. Other medical-device and consumer companies have cited similar challenges, such as Kimberly-Clark's struggles with its diaper business in China. And while some companies have seen China fuel growth, like Ralph Lauren's recent strength in the region, the orthopedic market remains particularly sensitive to government pricing actions.
Investors should also watch how Zimmer Biomet's sales-force revamp plays out. Such overhauls often take time to bear fruit, and the company's guidance assumes that the new structure will start generating stronger growth by 2027. If that doesn't materialize, the stock could face pressure.
RBC's $125 target is a bullish signal, but it's not a guarantee. The market will be watching quarterly results closely to see whether the company can deliver on its promises. For now, the raised guidance is a positive sign, but the real test will come in 2027.
