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Smith & Nephew PLC

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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation
GBX 8,161.00JvvpgDvnzfsgy

Smith & Nephew Saw Signs of Improvement in the First Quarter; No Change to Our FVE

Narrow-moat Smith & Nephew posted abbreviated first-quarter results that showed signs of recovery as the pandemic recedes, which fits with expectations for the full year and we’re holding steady on our fair value estimate. The firm delivered 6% quarterly revenue growth year over year, which we view as strong, especially considering the prior-year period also featured 6% top-line growth. Part of this strength was driven by the faster-growing sports medicine and ENT product areas, which skew toward outpatient settings and ambulatory surgical centers, which have proven less affected by COVID-19 surges. Strong quarterly growth in the advanced wound management segment (up 8% year over year) was also impressive, and we see it as a positive sign that non-pandemic surgical procedures have resumed. Management indicated that even Europe, which has lagged behind the U.S. in its recovery of procedure volume, has seen revenue approach its pre-pandemic levels most recently.

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