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Smith & Nephew plc (GB:SN)
LSE:SN
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Smith & Nephew
(LSE:SN)
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Rating:77Outperform
Price Target:
1,600.00p
▲(22.04% Upside)
Smith & Nephew's strong financial performance and positive earnings call sentiment are key strengths, driving a solid overall score. Technical indicators suggest bullish momentum, though overbought conditions may limit short-term gains. Valuation concerns due to a high P/E ratio and external risks from tariffs and reimbursement changes are notable challenges.
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
£11.23B
Dividend Yield2.19%
Average Volume (3M)4.03M
Price to Earnings (P/E)30.5
Beta (1Y)1.00
Revenue Growth2.51%
EPS Growth56.56%
CountryUK
Employees17,349
SectorHealthcare
Sector Strength45
IndustryMedical - Devices
Share Statistics
EPS (TTM)0.32
Shares Outstanding848,579,500
10 Day Avg. Volume3,898,282
30 Day Avg. Volume4,032,155
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£1,433.33Price Target Upside9.33% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering12
Smith & Nephew Business Overview & Revenue Model
Company DescriptionSmith & Nephew (SN) is a global medical technology company that focuses on the innovation and development of advanced medical devices and solutions. The company operates primarily in three sectors: Orthopaedics, Advanced Wound Management, and Sports Medicine. Its core products include joint implants, wound care products, and surgical instruments, which are designed to enhance surgical outcomes and improve patient recovery. Smith & Nephew is committed to delivering high-quality healthcare solutions through continuous research and development.
How the Company Makes MoneySmith & Nephew generates revenue through the sale of its medical devices and products across its three primary sectors. The Orthopaedics segment, which includes joint reconstruction and trauma products, is a significant revenue driver, as it caters to the growing demand for hip and knee replacement surgeries. The Advanced Wound Management division contributes by providing innovative wound care solutions, addressing the needs of patients with chronic and acute wounds. The Sports Medicine sector focuses on arthroscopy and other minimally invasive surgical procedures, which are gaining popularity in the healthcare market. Moreover, Smith & Nephew benefits from strategic partnerships with healthcare providers and payers, as well as collaborations with research institutions to enhance product offerings. The company also invests in marketing and sales initiatives to promote its products, ensuring a steady stream of revenue.
Smith & Nephew Earnings Call Summary
Earnings Call Date:Aug 05, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Feb 24, 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. 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 | 5.97B | 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 | 979.00M | 943.00M | 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
1311.00
Price Trends
1353.63
Negative
1228.71
Positive
1128.85
Positive
Market Momentum
-4.34
Positive
40.54
Neutral
16.50
Positive
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 1311 is below the 20-day moving average (MA) of 1335.20, below the 50-day MA of 1353.63, and above the 200-day MA of 1128.85, indicating a neutral trend. The MACD of -4.34 indicates Positive momentum. The RSI at 40.54 is Neutral, neither overbought nor oversold. The STOCH value of 16.50 is Positive, 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 |
|---|---|---|---|---|---|---|---|
77 Outperform | £11.23B | 30.50 | 9.30% | 2.19% | 2.51% | 56.56% | |
73 Outperform | £3.97B | 13.89 | 15.66% | 3.54% | 3.73% | 27.13% | |
70 Outperform | £4.81B | 29.35 | 12.73% | 2.09% | 4.18% | 37.65% | |
64 Neutral | £492.89M | 53.65 | 3.66% | 1.17% | 68.03% | -18.27% | |
62 Neutral | £971.73M | 52.50 | 2.51% | 0.95% | 6.95% | -34.38% | |
51 Neutral | $7.86B | -0.30 | -43.30% | 2.27% | 22.53% | -2.21% | |
44 Neutral | £45.89M | ― | -38.49% | ― | ― | ― |
* Healthcare Sector Average
GB:SN
Smith & Nephew
1,311.00
252.61
23.87%
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GB:CREO
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GB:HIK
Hikma Pharmaceuticals
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GB:SPI
Spire Healthcare
241.50
19.12
8.60%
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.