SNN Stock Forecast & Price Target

Smith & Nephew exhibited a robust underlying revenue growth of 5.3%, signaling positive momentum, particularly within the orthopedic and sports medicine sectors, which constitute a significant portion of the firm's sales mix. Notably, the company anticipates stronger performance in the second half of the year, driven by improvements in operating leverage, cost management, and network optimization, which are expected to enhance trading margins. With expectations of achieving a 5% revenue growth for 2025 and a trading profit margin between 19.0% and 20.0%, the outlook remains optimistic for sustained performance across key markets, despite some challenges in China.

The financial outlook for Smith & Nephew appears negative due to several fundamental challenges. Revenue guidance suggests a weaker performance in Q1 FY25, influenced by factors such as fewer selling days and ongoing issues with distributor inventory levels, particularly in China, which will continue to dampen growth expectations. Additionally, the company faces significant headwinds from evolving reimbursement rates in the U.S. healthcare environment, while its orthopedic segment's return on invested capital (ROIC) remains notably below that of its other business segments, indicating persistent underperformance in a crucial revenue area.