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Smith & Nephew shares lift as profits, sales beat forecasts
(Sharecast News) - Shares in Smith & Nephew surged on Tuesday as the medical equipment maker's full year profit and revenue beat downgraded forecasts, driven by a rebound in its US knee and hip implant unit, which offset continuing headwinds in China. Revenue jumped 4.7% to $5.8bn, while operating profit surged 54.6% to $657m. The results follow a profit warning at the company's third-quarter trading update and pressure from shareholders to break up the group.
Trading profit rose 8.2% to more than $1bn and the margin increased to 18.1%, both also above the downgraded guidance issued in October. Fourth quarter revenue was up 7.8% to $1.57bn.
Smith & Nephew at the end of October cut its full-year revenue target due to weak consumer demand in China and difficulties with the country's bulk-buying procurement strategy.
The group reduced its revenue growth guidance to 4.5% from between 5 - 6%.
"We finished the year strongly and US Reconstruction was again sequentially better. Our innovation continued to deliver, with more than 60% of revenue growth in 2024 coming from products launched in the last five years," chief executive Deepak Nath said on Tuesday.
"We have launched nearly 50 new products over the last three years and have an exciting pipeline for 2025."
The company said it now expected 2025 underlying revenue growth to be around 5% and first quarter underlying revenue growth of 1% to 2% primarily due to continued China headwinds and one less trading day, with "acceleration thereafter". Full-year trading profit margin is forecast to be 19 - 20%.
Nath is in the middle of a restructure aimed at turning around the company but faces increasing pressure from activist investor Cevian Capital, which last week increased its holding to 7.5%.
"There is much more to be done but we have made solid progress fixing the foundations and expect a step-up in returns in 2025, including significant margin expansion. We are confident that this will be the year when transformation starts to unlock substantial value for our shareholders," Nath said.
Reporting by Frank Prenesti for Sharecast.com
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