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Smith & Nephew
(LSE:SN)
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Rating:68Neutral
Price Target:
1,305.00 p
▲(14.47% Upside)
Action:Downgraded
Date:08/04/26
The score reflects improving financial performance (stronger margins and cash flow versus prior years) as the primary support. Technicals are moderately positive with short- to mid-term momentum improving, though the stock is still below the 200-day average. Valuation is somewhat demanding at ~21x earnings, and the earnings call added mixed signals: revenue guidance was cut, but profit/cash targets were maintained via increased efficiency savings and capital return.
Positive Factors
Margin expansion and profitability
Sustained margin improvement reflects structural cost efficiency and pricing power. Higher trading and gross margins expand operating leverage, fund R&D and buybacks, and allow management to meet profit targets even with softer top-line, strengthening long-term profitability resilience.
Negative Factors
Lowered revenue guidance and soft top-line
A reduced revenue outlook signals persistent demand headwinds that may limit organic growth for multiple quarters. Reliance on efficiency savings to preserve margins raises execution risk and means topline recovery is a critical dependency for durable earnings and reinvestment plans.
Read all positive and negative factors
Positive Factors
Negative Factors
Margin expansion and profitability
Sustained margin improvement reflects structural cost efficiency and pricing power. Higher trading and gross margins expand operating leverage, fund R&D and buybacks, and allow management to meet profit targets even with softer top-line, strengthening long-term profitability resilience.
Read all positive factors
Smith & Nephew (SN) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£9.17B
Dividend Yield2.65%
Average Volume (3M)3.93M
Price to Earnings (P/E)19.5
Beta (1Y)1.05
Revenue Growth2.17%
EPS Growth27.33%
CountryUK
Employees18,362
SectorHealthcare
Sector Strength45
IndustryMedical - Devices
Share Statistics
EPS (TTM)0.76
Shares Outstanding837,417,100
10 Day Avg. Volume2,834,900
30 Day Avg. Volume3,927,868
Financial Highlights & Ratios
PEG Ratio0.39
Price to Book (P/B)2.73
Price to Sales (P/S)2.30
P/FCF Ratio16.61
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£1,323.00Price Target Upside16.05% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering8
EPS Forecast (FY)1.09
Revenue Forecast (FY)£6.51B
Smith & Nephew Business Overview & Revenue Model
Company Description
Smith & Nephew plc, along with its subsidiaries, operates globally as a developer, manufacturer, marketer, and seller of medical technology. Its orthopaedic division offers knee implants for replacement procedures and hip implants for joint recons...
How the Company Makes Money
Smith & Nephew makes money primarily by selling medical devices and consumable clinical products to healthcare providers (e.g., hospitals, ambulatory surgery centers, and clinics) through direct sales forces and distributors, depending on the mark...
Smith & Nephew Earnings Call Summary
Earnings Call Date:Aug 04, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Feb 23, 2027
Earnings Call Sentiment Neutral
The call balanced clear operational and financial progress (strong trading profit, margin expansion, sizeable efficiency savings, product launches and robotics/innovation momentum) against a disappointing top-line start driven by U.S. Orthopaedics and Advanced Wound Bioactives reimbursement/market frictions. Management lowered revenue growth guidance for 2026 to around 4% but maintained profit, cash flow and ROIC targets by accelerating savings and offsetting tariff impacts. Execution risk remains in Orthopaedics set deployments, skin substitute reimbursement adaptation and near-term cash timing, while multiple innovation and commercial levers are positioned to drive recovery in H2 and into 2027.Positive Updates
Strong profitability and margin expansion
Trading profit of $566 million (up $43 million), trading margin 18.3% (up 60 bps); underlying gross profit $2.2 billion with gross margin 71.1% (up 60 bps).
Negative Updates
Revenue below expectations and guidance cut
Q2 underlying revenue growth 1.6% (revenue $1.6 billion); management revised full-year underlying revenue growth to around 4% (previously higher) due to softer start to the year.
Read all updates
Q2-2026 Updates
Positive
Negative
Strong profitability and margin expansion
Trading profit of $566 million (up $43 million), trading margin 18.3% (up 60 bps); underlying gross profit $2.2 billion with gross margin 71.1% (up 60 bps).
Read all positive updates
Company Guidance
Management lowered 2026 revenue guidance to around 4% underlying growth (Q2 underlying +1.6%; Q2 revenue $1.6bn; Q2 reported +2.8% including a 120bp FX tailwind) and now expects H2 growth of 5–5.5%; H1 revenue was $3.1bn (+2.3% underlying; ADS +3.1%). They reaffirmed profit and cash targets: trading profit guidance ~8% growth excluding M&A (H1 trading profit $566m; trading margin 18.3%), ~ $1.3bn trading profit including Integrity (marginally dilutive in 2026), adjusted EPS $0.477 (+11%), basic EPS +6.2%, interim dividend $0.156 (+4%). Efficiency savings were stepped up to ~$200m for 2026 (additional $50m), with ~ $133m delivered in H1 and cumulative savings of $330m (target $325–375m); gross profit H1 $2.2bn (gross margin 71.1%, +60bps). Cash metrics: H1 trading cash flow $437m, free cash flow $231m (guidance ~ $800m for 2026), cash conversion 77%, net debt ≈ $3bn (up $260m), leverage 1.8x EBITDA; $500m buyback announced ($260m completed). Other call metrics: ROIC >10%, tariffs broadly neutral net of refunds, inventory DSI reduced (group down 72 days incl. reclassification, 40 days excl.), and a skin‑substitutes trading‑profit headwind now expected toward the upper end of the previously guided $20–40m range.Smith & Nephew Financial Statement Overview
Summary
Income Statement
74
Positive
Balance Sheet
71
Positive
Cash Flow
70
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 6.38B | 6.29B | 5.81B | 5.55B | 5.21B | 5.21B |
| Gross Profit | 4.35B | 4.28B | 4.05B | 3.82B | 3.67B | 3.67B |
| EBITDA | 1.66B | 1.61B | 1.24B | 956.00M | 874.00M | 1.24B |
| Net Income | 642.98M | 638.11M | 412.00M | 263.00M | 223.00M | 524.00M |
Balance Sheet | ||||||
| Total Assets | 11.07B | 10.46B | 10.35B | 9.99B | 9.97B | 10.92B |
| Cash, Cash Equivalents and Short-Term Investments | 757.91M | 557.20M | 619.00M | 302.00M | 350.00M | 1.29B |
| Total Debt | 3.80B | 3.33B | 3.32B | 3.08B | 2.87B | 3.34B |
| Total Liabilities | 5.86B | 5.17B | 5.09B | 4.77B | 4.71B | 5.35B |
| Stockholders Equity | 5.21B | 5.29B | 5.26B | 5.22B | 5.26B | 5.57B |
Cash Flow | ||||||
| Free Cash Flow | 847.28M | 869.88M | 606.00M | 181.00M | 110.00M | 469.00M |
| Operating Cash Flow | 1.33B | 1.31B | 987.00M | 608.00M | 468.00M | 877.00M |
| Investing Cash Flow | -675.50M | -414.52M | -569.00M | -448.00M | -472.00M | -691.00M |
| Financing Cash Flow | -578.70M | -975.04M | -86.00M | -200.00M | -926.00M | -645.00M |
Smith & Nephew Technical Analysis
Negative
1140.00
Price Trends
1134.84
Negative
1150.18
Negative
1197.62
Negative
Market Momentum
-11.31
Positive
42.68
Neutral
11.48
Positive
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 1140 is above the 20-day moving average (MA) of 1135.50, above the 50-day MA of 1134.84, and below the 200-day MA of 1197.62, indicating a bearish trend. The MACD of -11.31 indicates Positive momentum. The RSI at 42.68 is Neutral, neither overbought nor oversold. The STOCH value of 11.48 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GB:SN.
Smith & Nephew Peers Comparison
UnderperformOutperform
Sector (51)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Outperform | £4.48B | 48.99 | 8.40% | 2.49% | 1.94% | -43.71% | |
70 Outperform | £3.41B | 12.39 | 15.05% | 3.91% | 2.48% | 3.36% | |
68 Neutral | £9.17B | 19.51 | 12.25% | 2.55% | 2.17% | 27.33% | |
63 Neutral | £608.10M | 60.82 | 3.87% | 1.68% | 28.96% | 39.58% | |
62 Neutral | £941.55M | 57.21 | 2.22% | 0.67% | 4.54% | -34.92% | |
51 Neutral | $7.86B | -0.30 | -43.30% | 2.27% | 22.53% | -2.21% | |
50 Neutral | £290.32M | -0.60 | -31.83% | ― | -5.89% | -310.69% |
* Healthcare Sector Average
GB:SN
Smith & Nephew
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GB:SPI
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.