Smith & Nephew a top pick at Bernstein, says ’12-point plan will drive top-line growth’

By Sam Boughedda

Smith & Nephew (LON:) (NYSE:) is Bernstein’s top pick in EU medtech, analysts told investors in a note Friday.

The analysts, who have an Outperform rating and a $36 price target on the stock, stated that the “ten-year turnaround is finally ready to deliver” and that the firm likes SNN’s team of CEO Deepak Nath and CFO Anne-Francoise Nesmes. They also noted the work done by the company under former CEOs in previous years.

According to Bernstein, the gaps in SNN’s portfolio are now filled, driving an acceleration in sales growth.

“S&N’s historic underperformance in Ortho has been largely driven by gaps in the portfolio over time (revision hip, uni knee, cementless knee, large trauma plates). With a full suite of products now in place, S&N should grow at or above the market in the Ortho segments where it has lagged,” the analysts wrote.

The “12-point plan will drive top-line growth and margin improvement,” said the analysts, adding that expectations have bottomed out.

“The specificity of the initiatives laid out by Mr. Nath give us confidence in the path to strong earnings growth,” they added.

“At Q4, the mid-term margin target was reduced, while the stock went up +4%. We are above the new guidance of 20% by 2025 (at 21.1%) while consensus is at 19.1%.”