Barclays Initiates as ZBH Slips Toward November Earnings

The bull-bear debate centres almost entirely on the U.S. knee business and the go-direct salesforce overhaul. Bears point to a stark fact: management has explicitly said the transition will not be complete until end of 2027, and related headwinds will persist throughout. U.S. knee revenue rose only 2% constant currency in the most recent quarter as lost accounts and the legacy NexGen phase-out offset modest underlying growth. The bull case rests on the Paragon 28 acquisition accelerating toward double-digit growth, solid large-joint franchise depth, and a reaffirmed 2026 guide. Q1 net sales rose 9.3% reported and EPS of $2.09 beat expectations, so the company can deliver at the top line. The question is whether the knee drag runs longer and deeper than the guide implies. EPS momentum factor scores rank in the 37th and 43rd percentiles over 30 and 90 days respectively, suggesting estimate revisions are muted rather than constructive. The EPS surprise score at the 26th percentile says the beat history is not strong.

Short interest is a secondary story here, not a primary one. At 4.3% of the free float, it has fallen about 5.7% over the past week and is down from a recent peak of roughly 9.5 million shares hit around September 30. That easing is notable given the stock's continued price weakness: shorts have not been adding into the dip. Borrowing conditions are loose. Availability has risen sharply, up 59% over the week to nearly 1,477%, meaning there are roughly 15 shares available in the lending pool for every one currently borrowed. Cost to borrow has drifted lower too, now at 0.39%, its lowest level over the period tracked and down 28% over the past month. The ORTEX short score has also trended lower, from 44.3 on September 30 to 40.3 now, a quiet unwind rather than a build. Options positioning has turned slightly less defensive than it was a few weeks ago. The put/call ratio is 0.96 on Tuesday, back below the 20-day mean of 1.04 after running well above it through late September. A reading half a standard deviation below the mean is unremarkable, and the PCR has ranged widely over the past year from below 0.10 to above 2.29, so the current level carries limited signal on its own.

The institutional register shows Dodge and Cox as the largest holder at 12.6% of shares, with a reported increase of 582,000 shares as of June 30. Capital Research added more than 3 million shares in the same period, a meaningful build to 6.5% of the stock. BlackRock added 685,000 shares through September 30 and now holds 8.2%. No 13D activists appear on the register. All 13G filings, passive stakes. On insiders, the 90-day net is modestly negative at roughly minus 8,700 shares and minus $824,000 in value. The bulk of that reflects open-market sales by the Group President for Global Business in mid-September and a separate sale in early September. These are not large in the context of the stock's float, and none were made under a 10b5-1 plan, but the direction is worth noting given the proximity to earnings. The most recent print in August produced a 1.4% next-day gain and a 2.2% five-day gain, and Q1 2026 (reported late July) saw a 5.5% next-day move and 4.1% over five days, both positive.

With November 4 now 28 days away, the next pivot point is whether Zimmer Biomet can show incremental progress on the knee transition or whether the go-direct headwinds come in worse than the guide allows, a question the Barclays initiation at the current price rather than at the consensus target suggests some on the Street are treating as genuinely open.