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Smith & Nephew (UK) (GB:SN)
:SN
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Smith & Nephew
(LSE:SN)
74Outperform
Positive Factors
Cost Savings
Significant cost savings are being achieved, with expectations to reach $300 million by the end of 2025, indicating strong financial management.
European Market Position
The company holds a strong position in the European market with its robotic platform, ranking as the #1 provider.
US Recon Improvement
Smith & Nephew continues its improvement in US Recon, with both US Knees and US Hips sequentially improving.
Negative Factors
China Market Challenges
Ortho sales in China were significantly down and are expected to continue at the same extent in the near term.
Trading Margin Guidance
Downgraded trading profit margin guidance for 2024 and 2025 indicates low conviction in the company returning to margins sustainably above 20% in the medium term.
US Orthopaedics Performance
Smith & Nephew released a disappointing Q3 trading report, with growth in the US Orthopaedics business still lagging peers and headwinds in China leading to guidance downgrades.
Smith & Nephew (SN) vs. S&P 500 (SPY)
Market Cap
£8.61B
Dividend Yield2.94%
Average Volume (3M)3.33M
Price to Earnings (P/E)26.6
Beta (1Y)1.01
Revenue Growth1.85%
EPS Growth51.77%
CountryUK
Employees17,349
SectorHealthcare
Sector Strength66
IndustryMedical - Devices
Share Statistics
EPS (TTM)0.37
Shares Outstanding875,927,800
10 Day Avg. Volume4,138,448
30 Day Avg. Volume3,330,951
Financial Highlights & Ratios
PEG Ratio0.51
Price to Book (P/B)N/A
Price to Sales (P/S)2.11
Price to Cash Flow (P/CF)8.20
P/FCF Ratio10.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£1,247.70Price Target Upside26.85% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering10
Smith & Nephew Business Overview & Revenue Model
Company DescriptionSmith & Nephew (SN) is a global medical technology company headquartered in the United Kingdom. The company operates in three primary sectors: Orthopaedics, Sports Medicine & ENT, and Advanced Wound Management. Its core products and services include joint replacement systems, arthroscopy tools for minimally invasive surgery, and advanced wound care products designed to improve patient outcomes and support healthcare professionals in enhancing their quality of care.
How the Company Makes MoneySmith & Nephew generates revenue through the sale of its medical devices and products across its three primary sectors. In Orthopaedics, the company makes money by providing joint replacement systems, trauma devices, and robotics-assisted surgical technologies to hospitals and clinics. In the Sports Medicine & ENT sector, revenue comes from the sale of products designed for minimally invasive surgery, such as arthroscopy tools and equipment for ear, nose, and throat procedures. The Advanced Wound Management sector contributes to earnings through the sale of wound care products like dressings, bandages, and negative pressure wound therapy systems. The company also benefits from strategic partnerships and collaborations with healthcare providers and research institutions, which help expand its market reach and drive innovation in product development. Additionally, Smith & Nephew invests in research and development to maintain its competitive edge and meet the evolving needs of the healthcare industry.
Smith & Nephew Financial Statement Overview
Summary
Smith & Nephew exhibits strong financial health with consistent revenue growth and profitability improvements. The company efficiently manages its operating costs and debt levels, leading to enhanced net income and shareholder returns. Cash flows are robust, providing a solid foundation for future investments. Nonetheless, continuous focus on optimizing capital expenditures and leveraging assets more effectively will further strengthen its financial position.Income Statement
The company's revenue has shown a consistent growth, rising 4.7% from 2023 to 2024. Gross profit margin remains strong at 69.6% in 2024, indicating effective cost management. Net profit margin improved from 4.7% in 2023 to 7.1% in 2024, showcasing enhanced profitability. EBIT and EBITDA margins also improved, reflecting operational efficiency. However, the growth rate could be higher compared to peers in the industry.85
Very Positive
Balance Sheet
Smith & Nephew's debt-to-equity ratio stands at 0.63, indicating moderate leverage and effective use of debt. Return on equity increased to 7.8% in 2024, revealing improved shareholder value generation. The equity ratio is stable, although slightly lower than ideal industry standards, indicating room for improvement in reducing liabilities relative to assets.78
Positive
Cash Flow
The company demonstrated strong cash flow management with operating cash flow exceeding net income, suggesting effective cash generation from operations. Free cash flow grew significantly by 234.8% from 2023 to 2024. Both operating and free cash flow to net income ratios are favorable, indicating robust cash flow relative to profitability. However, the high capital expenditures could impact future free cash flow growth.80
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 5.64B | 5.81B | 5.55B | 5.21B | 5.21B | 4.56B | Gross Profit |
| 3.97B | 4.05B | 3.89B | 3.67B | 3.67B | 3.16B | EBIT |
| 735.00M | 657.00M | 425.00M | 315.00M | 593.00M | 295.00M | EBITDA |
| 1.06B | 1.22B | 956.00M | 943.00M | 1.24B | 866.00M | Net Income Common Stockholders |
| 305.00M | 412.00M | 263.00M | 223.00M | 524.00M | 448.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 137.00M | 619.00M | 302.00M | 350.00M | 1.29B | 1.76B | Total Assets |
| 8.95B | 10.35B | 9.99B | 9.97B | 10.92B | 11.01B | Total Debt |
| 2.13B | 3.32B | 3.08B | 2.87B | 3.34B | 3.69B | Net Debt |
| 2.00B | 2.70B | 2.78B | 2.52B | 2.05B | 1.93B | Total Liabilities |
| 3.99B | 5.09B | 4.77B | 4.71B | 5.35B | 5.73B | Stockholders Equity |
| 4.95B | 5.26B | 5.22B | 5.26B | 5.57B | 5.28B |
| Cash Flow | Free Cash Flow | ||||
| 301.00M | 606.00M | 181.00M | 110.00M | 469.00M | 492.00M | Operating Cash Flow |
| 733.00M | 987.00M | 608.00M | 468.00M | 877.00M | 935.00M | Investing Cash Flow |
| -626.00M | -569.00M | -448.00M | -472.00M | -691.00M | -606.00M | Financing Cash Flow |
| 258.00M | -86.00M | -200.00M | -926.00M | -645.00M | 1.16B |
Smith & Nephew Technical Analysis
Negative
983.60
Price Trends
1053.51
Negative
1018.56
Negative
1050.57
Negative
Market Momentum
-25.77
Positive
38.80
Neutral
40.64
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:SN, the sentiment is Negative. The current price of 983.6 is below the 20-day moving average (MA) of 1028.84, below the 50-day MA of 1053.51, and below the 200-day MA of 1050.57, indicating a bearish trend. The MACD of -25.77 indicates Positive momentum. The RSI at 38.80 is Neutral, neither overbought nor oversold. The STOCH value of 40.64 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GB:SN.
Smith & Nephew Peers Comparison
Overall Rating
UnderperformOutperform
Sector (50)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | £10.06B | 34.97 | 16.90% | 0.83% | 11.94% | 20.48% | |
76 Outperform | £156.99B | 28.50 | 17.43% | 2.42% | 14.82% | 14.98% | |
74 Outperform | £8.61B | 26.63 | 7.78% | 2.94% | 1.85% | 51.77% | |
73 Outperform | £4.93B | 14.92 | 11.08% | 4.01% | -6.75% | -0.02% | |
69 Neutral | £54.15B | 21.16 | 19.06% | 4.56% | 3.46% | -48.06% | |
67 Neutral | £8.79B | 28.74 | 7.38% | 2.60% | 1.13% | -19.48% | |
50 Neutral | $5.14B | 3.10 | -40.94% | 2.95% | 17.94% | 2.00% |
* Healthcare Sector Average
Performance Comparison
GB:SN
Smith & Nephew
983.60
24.10
2.51%
GB:AZN
AstraZeneca
10,140.00
-898.34
-8.14%
GB:RTO
Rentokil Initial
342.80
-72.27
-17.41%
GB:DCC
DCC plc
4,754.00
-578.91
-10.86%
GB:GSK
GlaxoSmithKline
1,362.00
-224.24
-14.14%
GB:HLMA
Halma plc
2,656.00
438.26
19.76%
Smith & Nephew Earnings Call Summary
Earnings Call Date: Feb 25, 2025 | % Change Since: -4.19% | Next Earnings Date: Jul 31, 2025
Earnings Call Sentiment Positive
The earnings call highlighted Smith & Nephew's strong performance in Q4 2024, driven by innovation and operational improvements. However, challenges in China and pricing pressures remain concerns. The company has a positive outlook for 2025, expecting growth and margin expansion.Highlights
Strong Year-End Performance
Smith & Nephew delivered 8.3% underlying growth in Q4 2024, with strong volumes across most regions and 60 basis points of margin expansion for the year.
Innovation Driving Growth
60% of revenue growth in 2024 came from products launched in the last five years, with continued investment in innovation expected to support further growth.
Operational Improvements
The company has enhanced its organizational structure, reducing headcount by 9% and improving inventory management, resulting in 95% cash conversion.
Optimized Cost Base
Smith & Nephew expects gross cost savings of $325 to $375 million, with significant manufacturing and procurement savings contributing to margin expansion.
Positive Outlook for 2025
The company forecasts around 5% revenue growth and trading margin expansion to 19-20% in 2025, with continued improvements in ROIC expected.
Lowlights
Challenges in China
China presented a major headwind, costing 280 basis points of group growth in Q4. The Orthopedics and Sports Medicine segments faced significant declines due to VBP impacts.
Orthopedics Margin Pressure
Despite operational improvements, the Orthopedics segment only achieved a 20 basis point margin increase, with ongoing challenges in U.S. Recon growth.
Pricing Pressure
The company anticipates a return to normal levels of price erosion (1-2%), which could pressure margins in the future.
Company Guidance
During the call, Smith & Nephew's CEO, Deepak Nath, emphasized the financial improvements driven by the 12-Point Plan, highlighting a 60 basis points (bps) margin expansion and a 95% cash conversion rate in 2024, which exceeded their target. Operational and commercial enhancements, combined with innovation, contributed to an 8.3% underlying growth in Q4, despite a 280 bps headwind from China. The company maintained its 2025 outlook, anticipating around 5% revenue growth and significant trading margin expansion to 19-20%, supported by operating leverage and manufacturing cost optimizations. The call also underscored the company's consistent above-average growth over four years, with 80 bps of trading margin expansion since 2022, and a rise in ROIC to 7.4%, aiming to exceed the cost of capital in 2025. Additionally, Smith & Nephew achieved a free cash flow of over $0.5 billion in 2024, with inventory days reduced and restructuring costs down. The company expects further margin accretion in the subsequent years, driven by continued operational improvements and cost-saving initiatives.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.