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Smith & Nephew plc (GB:SN)
LSE:SN
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Smith & Nephew
(LSE:SN)
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Rating:70Outperform
Price Target:
1,366.00p
▲(7.98% Upside)
Smith & Nephew's strong financial performance and positive earnings call sentiment are offset by technical indicators suggesting bearish momentum and a high valuation. While the company shows robust growth and operational efficiency, valuation concerns and market challenges, particularly in emerging markets and tariff uncertainties, weigh on the overall score.
Positive Factors
Revenue Growth
The consistent revenue growth indicates strong market demand and effective business strategies, supporting long-term financial stability.
Cash Flow Management
Robust cash flow management enhances financial flexibility, enabling strategic investments and shareholder returns through buybacks.
Product Innovation
New product launches like the CENTRIO PRP System strengthen the product portfolio and drive competitive advantage in wound care.
Negative Factors
Emerging Markets Challenges
Performance issues in emerging markets, particularly China, can hinder growth prospects and market expansion efforts.
Tariff Uncertainty
Tariff uncertainties create cost pressures and potential disruptions, impacting profitability and strategic planning.
Reimbursement Headwinds
Changes in reimbursement policies can adversely affect sales and profitability, particularly in the Advanced Wound Management segment.
Smith & Nephew (SN) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£12.02B
Dividend Yield2.27%
Average Volume (3M)3.93M
Price to Earnings (P/E)32.6
Beta (1Y)0.98
Revenue Growth2.51%
EPS Growth56.56%
CountryUK
Employees17,349
SectorHealthcare
Sector Strength45
IndustryMedical - Devices
Share Statistics
EPS (TTM)0.33
Shares Outstanding848,707,340
10 Day Avg. Volume2,834,900
30 Day Avg. Volume3,927,868
Financial Highlights & Ratios
PEG Ratio0.50
Price to Book (P/B)2.07
Price to Sales (P/S)1.87
P/FCF Ratio17.94
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£1,501.25Price Target Upside18.68% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Smith & Nephew Business Overview & Revenue Model
Company DescriptionSmith & Nephew (SN) is a global medical technology company that specializes in advanced wound management, orthopedic reconstruction, and sports medicine. Founded in 1856 and headquartered in London, the company operates in three primary sectors: Advanced Wound Management, Orthopedics, and Sports Medicine. Smith & Nephew offers a range of products including wound dressings, surgical instruments, joint replacement implants, and solutions for minimally invasive surgeries, aimed at enhancing the quality of life for patients and improving outcomes for healthcare providers.
How the Company Makes MoneySmith & Nephew generates revenue through the sale of medical devices and related services across its three main sectors. The company earns money primarily from the sale of advanced wound care products, orthopedic implants, and sports medicine solutions. Key revenue streams include direct product sales to hospitals, surgical facilities, and healthcare providers, as well as partnerships with distributors and medical professionals. Significant contracts with healthcare systems and innovative product launches also contribute to the company's earnings. Additionally, Smith & Nephew invests in research and development to create new technologies and improve existing products, which helps maintain a competitive edge and drives long-term growth.
Smith & Nephew Earnings Call Summary
Earnings Call Date:Aug 05, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Mar 02, 2026
Earnings Call Sentiment Positive
The call highlighted strong revenue growth, profitability improvements, and successful execution of operational efficiencies, with significant progress in the U.S. Recon and Robotics segments. However, challenges remain in emerging markets, particularly China, and there are uncertainties related to tariffs and future reimbursement changes for skin substitutes.Q2-2025 Updates
Positive Updates
Strong Revenue Growth
Smith & Nephew reported a 6.7% underlying revenue growth in the quarter with a 7.8% reported growth due to a 110 basis point tailwind from foreign exchange.
Profitability and Margin Expansion
There was a 100 basis point expansion in trading margin in the first half, slightly ahead of expectations. The company is on track for a full-year margin guidance of 19% to 20%.
Free Cash Flow and Share Buyback
Free cash flow increased by 500% to $244 million in the first half, and a $500 million share buyback is planned for the second half of 2025, funded by cash flow and existing balances.
Advanced Wound Management Growth
Advanced Wound Management showed a 10.2% growth, driven by a strong rebound in Bioactives and double-digit growth in skin substitutes.
Operational Efficiency Improvements
A 70% increase in trading cash flow was realized, attributed to cost savings, inventory reduction, and restructuring charge reductions.
Orthopaedics Margin Expansion
Orthopaedics saw a 230 basis point margin expansion due to inventory reduction, portfolio simplification, and focus on higher volume accounts.
Strong Performance in U.S. Recon and Robotics
Fourth consecutive quarter of sequential improvement in U.S. Recon and Robotics, with U.S. Hips and Knees showing acceleration.
Negative Updates
Emerging Markets Performance
Emerging markets declined by 0.2%, with strong growth in the Middle East and India offset by challenges in China due to volume-based procurement.
Tariff Uncertainty
Tariffs are expected to pose a $15 million to $20 million net headwind in 2025, with uncertainty remaining about the final outcome.
Challenges in U.S. Knee Segment
Softness in U.S. Knee growth attributed to portfolio rationalization and slower procedures among active surgeon base.
Skin Substitutes Reimbursement Headwinds
Proposed Medicare reimbursement changes for skin substitutes are anticipated to be a headwind to Advanced Wound Management sales and profitability in 2026.
Company Guidance
In the Smith & Nephew second quarter 2025 results meeting, CEO Deepak Nath highlighted the company's performance, featuring a 6.7% underlying revenue growth and a 100 basis point expansion in trading margin, slightly ahead of expectations. The company's Sports Medicine, Wound, and Orthopaedics units showed strong performances, with double-digit growth in Wound and sustained improvements in U.S. Recon and Robotics. Emerging markets, excluding China, grew by 12.2%. The trading cash flow rose by 70%, resulting in nearly $250 million of free cash flow in the first half. The company maintained its full-year margin guidance of 19% to 20%, anticipating a $15 million to $20 million impact from tariffs. Smith & Nephew also announced a $500 million share buyback, funded by 2025 cash flow and existing balances, without affecting its growth plans. The company remains committed to achieving market growth rates in U.S. Recon by the end of the year, leveraging innovation and improved commercial execution.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. However, there is room for improvement in optimizing capital expenditures and leveraging assets more effectively.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 | 5.97B | 5.81B | 5.55B | 5.21B | 5.21B | 4.56B |
| Gross Profit | 4.18B | 4.05B | 3.82B | 3.67B | 3.67B | 3.16B |
| EBITDA | 1.44B | 1.24B | 956.00M | 874.00M | 1.24B | 866.00M |
| Net Income | 493.64M | 412.00M | 263.00M | 223.00M | 524.00M | 448.00M |
Balance Sheet | ||||||
| Total Assets | 10.68B | 10.35B | 9.99B | 9.97B | 10.92B | 11.01B |
| Cash, Cash Equivalents and Short-Term Investments | 675.41M | 619.00M | 302.00M | 350.00M | 1.29B | 1.76B |
| Total Debt | 3.45B | 3.32B | 3.08B | 2.87B | 3.34B | 3.69B |
| Total Liabilities | 5.15B | 5.09B | 4.77B | 4.71B | 5.35B | 5.73B |
| Stockholders Equity | 5.53B | 5.26B | 5.22B | 5.26B | 5.57B | 5.28B |
Cash Flow | ||||||
| Free Cash Flow | 799.32M | 606.00M | 181.00M | 110.00M | 469.00M | 492.00M |
| Operating Cash Flow | 1.15B | 987.00M | 608.00M | 468.00M | 877.00M | 935.00M |
| Investing Cash Flow | -345.22M | -569.00M | -448.00M | -472.00M | -691.00M | -606.00M |
| Financing Cash Flow | -676.96M | -86.00M | -200.00M | -926.00M | -645.00M | 1.16B |
Smith & Nephew Technical Analysis
Neutral
1265.00
Price Trends
1308.40
Negative
1312.68
Negative
1190.64
Positive
Market Momentum
-16.43
Negative
43.55
Neutral
63.09
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:SN, the sentiment is Neutral. The current price of 1265 is above the 20-day moving average (MA) of 1250.83, below the 50-day MA of 1308.40, and above the 200-day MA of 1190.64, indicating a neutral trend. The MACD of -16.43 indicates Negative momentum. The RSI at 43.55 is Neutral, neither overbought nor oversold. The STOCH value of 63.09 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 |
|---|---|---|---|---|---|---|---|
75 Outperform | £3.89B | 13.61 | 15.66% | 4.07% | 3.73% | 27.13% | |
70 Outperform | £12.02B | 32.64 | 9.30% | 2.27% | 2.51% | 56.56% | |
69 Neutral | £488.82M | 53.18 | 3.66% | 1.26% | 68.03% | -18.27% | |
68 Neutral | £4.80B | 29.62 | 12.73% | 2.23% | 4.18% | 37.65% | |
55 Neutral | £708.98M | 38.30 | 2.51% | 1.32% | 6.95% | -34.38% | |
51 Neutral | $7.86B | -0.30 | -43.30% | 2.27% | 22.53% | -2.21% | |
49 Neutral | £46.40M | -1.88 | ― | ― | ― | ― |
* Healthcare Sector Average
GB:SN
Smith & Nephew
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296.49
30.61%
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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.