Smith & Nephew Share Discussion Threads

[accipitridae] 26/11/2016 09:06

Get hip to Smith & Nephew's investment appeal, Goldman advises
Share
10:36 25 Nov 2016
The hip and joint replacement specialist trades at a discount to sector peer Stryker

Goldman Sachs has lowered its earnings estimates for Smith & Nephew PLC (LON:SN. but still rates the medical technology company’s shares a ‘buy’.
The estimate changes follow the third quarter trading update earlier this morning and recent exchange rate movements, and see this year’s earnings per share (EPS) forecast decline 3%, while EPS estimates for the next three years have been shaved by 8%, reflecting weaker growth patterns in the third quarter.

“While organic revenue growth this year has fallen short of our expectations (we now expect Smith & Nephew to deliver 1.9% organic revenue growth in 2016, down from the 5% that we had forecast at the beginning of 2016, with the slowdown driven largely by China and the Middle East), we continue to believe that SN.L will accelerate organic revenue growth into the 4%-5% range in 2017 and beyond, given its geographic and product mix (>50% of revenues is in higher-growth markets) and a number of upcoming product launches (Renasys Touch and Connect, Navio in total knee, revision hip, and WereWolf),” the heavyweight US investment bank said.

The next catalyst for the share price is likely to be the appointment of a chief financial officer, expected before the end of the year.

Goldman’s lowered its price target to 1,310p from 1,370p, on the assumption that Smith & Nephew will trade around 18 times projected EPS for 2018; it currently trades at 15.4 times 2018 EPS, whereas sector peer Stryker Corporation (NYSE:SYK) trades on an earnings multiple of 17.4, despite a comparable growth outlook.

Goldman deems the disparity as unwarranted, and in fact suggests S&N should trade at a premium to Stryker, thanks to the possibility of being taken out by a competitor.

[accipitridae] 23/11/2016 11:51

could be massive bargin sub £11. underperformed Stryker 45% YTD. is this crazy?

[accipitridae] 22/11/2016 13:21

Google Finance has price/sales at 2.61 vs 4.20 for Stryker and 4.46 for J&J. Are these numbers correct?

[philanderer] 22/11/2016 13:09

Smith & Nephew: UBS reiterates neutral with a 1160p target

[its the oxman] 22/11/2016 11:37

Downside must be limited. Time to buy.

[accipitridae] 15/11/2016 09:34

could now be the time to buy? a growth company on 14X earnings looks cheap dont you think?

[accipitridae] 14/11/2016 16:16

do the big guys want the price down to force a merger?

[accipitridae] 14/11/2016 09:13

Have these finally bottomed? These look massively oversold, having under-performed Stryker by nearly 50% YTD. Unbelievable.

[steeplejack] 07/10/2016 13:11

Berenberg moved from buy to hold yesterday and that combined with XD hit the shares yesterday.I think that Berenberg are taking a risk to comment that Smith and Nephew are a perennial bid favourite,given Stryker is lurking in the wings and Johnson & Johnson are ever on the look out.If the recent tumble in sterling doesn't potentially sharpen corporate interest,nothing will.

[its the oxman] 07/10/2016 08:48

Wonder how long we will have to wait for bid spec to return. Must look real cheap now for a US buyer.

[mikeindevon] 10/8/2016 15:54

Thanks for the link ... I'll have a detailed look at that and study the maths in it -- it should prove interesting, and I'm always keen to see a different way of looking at things.

I'm still sceptical though that much of the highly rationalized and disciplined approach that Next makes applies here in this particular case.

However, either way, I don't think the S&N BoD will phoning up for my advice and it's ultimately, as it is always, a case of like it or lump it.

Let's see if I can't convince myself to like it.

Mike

[mikeindevon] 10/8/2016 12:24

Back in 1999 company documents published by S&N said ... that executive bonuses were based on EPS, EPS at constant currency, and return on capital.

Unless it's changed since then it would be easy to see why a BoD might choose the buy back route rather than pay a special dividend, especially if the BoD did not hold a large stake in the equity.

Mike

[mikeindevon] 10/8/2016 12:12

Whichever way you look at it that 300m, 25p per share is 'lost' to the company ... it's not being used to grow the business, it's not being used to invest in new plant or projects it's being spent in an incestuous deal to buy back its own shares. Apart from a small, temporary fillip to the share price ... and yesterdays buy of £4m worth of shares produced zero addition of value ... it does nothing for us small shareholders.

Rather it deprives us of 2% of yield.

But it does increase the EPS by about the same amount ... by cancelling shares.

So who does that benefit? It only benefits folk who hold few or no shares but gain from an increase in EPS ... and that smacks of bonus related management payments to me.

As I say, call me a cynic ... but that's why I say buy backs are bad news to shareholders ... of course if I was particularly jaundiced I'd be thinking that maybe the brokers have a specific buyer that they buy the shares from ... but that would be a very different game and completely contrary to the free and open market principle.

Mike

[philanderer] 10/8/2016 09:01

Downgraded by Barclays to equal-weight , tp 1240p

[minerve] 09/8/2016 23:51

mikeindevon

Buy backs may or may not be bad news depending on how the rest of the company is run. A clear policy of when and how they are used helps. Next uses buy backs extremely well and has in the past explained why. Share options are not going away and if capital is there the return on capital is sometimes better on buy backs than elsewhere.

[mikeindevon] 09/8/2016 23:46

Nice to see S&N's announcement of the 25p Special Dividend in yesterday's RNS!

Ooops sorry, got that wrong, they announced a buy back for the 300m, now that would have paid a 25p special. Ummm ... I wonder if the buy back will increase my shares by 25p -- I rather suspect it won't. So what's going on?

Wouldn't be something to do with buying/cancelling shares to artificially increase the EPS and management bonuses would it? Or maybe so that when options are issued we don't notice the dilution?

Call me a cynic ... but buy backs are bad news for us shareholders.

Mike

[philanderer] 09/8/2016 13:24

Tipped by Tempus today..

[croquetman] 28/7/2016 15:58

Surely the drop today is an over reaction?

[broadwood] 28/7/2016 07:31

Smith & Nephew's H1 pretax profit has slipped to $327m, from $411m a year earlier, with revenue higher at $2.33bn, from $2.27bn.

Interim dividend was 12.3 cents a share, from 11.8 cents.

CEO Olivier Bohuon said Q2 saw the continuation of many of the trends seen in the previous period, including growth of 10% in Sports Medicine Joint Repair and 5% in Knee Implants.

"The Emerging Markets improved from the previous quarter, despite conditions in China and the Gulf States remaining challenging, as previously highlighted. We expect our performance in China to begin to improve in the second half.

"For the first half of 2016 we delivered 3% revenue growth. The modest reduction in Trading profit was primarily due to the expected transactional currency headwind first signalled in 2015.

"The planned sale of our Gynaecology business demonstrates our disciplined strategic approach to capital deployment. More broadly, with strong core businesses, a growing pipeline of innovative products boosted by the recent acquisition of the robotics business Blue Belt Technologies, and more efficient operations, we are confident in our positioning and long-term prospects

[3rd eye] 01/7/2016 11:41

I like that.

[steeplejack] 01/7/2016 11:39

Yes,good.Quite apart from being a substantial dollar earner,i suspect that there's a bid premium being established due to enhanced attractions provided by sterling weakness to potential overseas buyers.