Smith & Nephew plc SNN is poised for growth on solid fundamentals across majority of its segments and the integration of Ceterix Orthopaedics.
Over the past six months, the Zacks Rank #1 (Strong Buy) stock has gained 8.9% against the industry's decline of 2.5%. The current level also compares favorably with the S&P 500 index’s 2.8% decline.
What’s Working in Favor of Smith & Nephew?
Strong franchise performance:
Of late, the company is showing strong revenue performance across majority of its key operating franchises. In the last reported quarter, growth within the company’s Reconstruction segment was driven by strong momentum within the knees and hips sub-segments. The knees sub-segment was driven by double-digit growth in JOURNEY II, ANTHEM and the LEGION Revision System. Growth within the hips subsegment came from the company’s increased focus on POLAR3 and REDAPT Revision System. The launch of the dual mobility product with its OXINIUM bearing has been a key development within this sub-segment.
Within the Arthroscopic Enabling Technologies segment, one crucial development has been the launch of the Flow 90 Wand, which expanded the application of the company’s COBLATION technology. The company is also witnessing a sharp increase in NAVIO robot and capital sales within its Surgical Business segment.
The franchise of Sports Medicine and Trauma also reported solid growth in the last quarter. This segment was driven by growth of the company’s joint repair business, especially doubled sales of its REGENETEN rotator cuff repair device. The franchise of Trauma and Extremities reported growth on the company’s EVOS and INTERTAIN product lines. The Advanced Wound Management segment also registered single-digit growth buoyed by strong sales at its Advanced Wound Care and Advanced Wound Devices portfolios.
In January, the company acquired Ceterix Orthopaedics, which strengthened its sports medicine portfolio. The market is currently upbeat about Smith & Nephew’s plan to take over Brainlab Orthopaedic Joint Reconstruction Business to augment its newly-launchedmulti-asset digital surgery and robotic ecosystem. The company has also announced an agreement to acquire Osiris Therapeutics which should enable Smith & Nephew to gain a strong foothold in the market of high growth regenerative medicine.
Strong geographic performance:
In the fourth quarter of 2018, the company reported revenue growth of 3% in the United States and 8% across the emerging markets. Revenue growth from China was in double digits. Despite a decline in revenues from its U.K market, the newly-appointed management in Germany is expected to result in solid growth recovery.
Which Way are Estimates Treading?
Further, Smith & Nephew’s estimate revision trend for the current year is favorable. In the past 60 days, two estimates moved up while none shifted down. Consequently, estimates were up from $2 per share to $2.02.
Zacks Rank and Other Key Picks
Currently, Smith & Nephew sports a Zacks Rank #1 (Strong Buy).
A few other top-ranked stocks in the broader medical space are Stryker Corporation SYK, Penumbra, Inc. PEN and Varian Medical Systems, Inc VAR. Notably, each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Stryker’s long-term earnings growth rate is projected at 10%
Penumbra’s long-term earnings growth rate is estimated at 20.9%.
Varian’s long-term earnings growth rate is projected at 8%.
Zacks' Top 10 Stocks for 2019
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