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Share Centre share of the week: Smith & Nephew

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02/11/2015
Helal Miah, investment research analyst at The Share Centre, picks hospital supplies firm Smith and Nephew as share of the week.

Smith & Nephew is an industry leader with three main global business units; Orthopaedic Reconstruction and Trauma, Endoscopy and Advanced Wound Management. These businesses jointly offer over 1,000 product ranges. Furthermore, the group currently offers distribution channels, purchasing agents and buying entities in over 90 countries worldwide.

Investors should be aware that revenue for the third quarter was 4% lower than the same period last year and slightly below expectations, principally due to currency movements. However, underlying earnings rose by 4% which was helped by sustained revenue growth in the Advanced Wound Care and Knee Implants divisions. Advanced Wound Devices also performed well, seeing a 17% increase in sales, and there was also an 8% increase in sales from emerging markets, despite slower sales to China.

As well as experiencing ageing populations in developed markets, the company is expecting to do well from rising average incomes in emerging markets. This is where healthcare systems and hospital infrastructure are developing at a robust pace. This is an area that Smith & Nephew are looking to strengthen and aim to be market leaders in Brazil, Russia, India and China.

We continue to recommend Smith & Nephew as a ‘buy’ for investors seeking capital growth and willing to accept a medium level of risk.  Investors may see cyclical and market fluctuations affect the company in the short term, but the longer term drivers remain steadfastly in place and the company has continued to show good underlying performances.

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