Smith & Nephew Earnings: Cori Robot and Trauma and Extremities Fuel Solid Quarterly Growth

Smith & Nephew’s abbreviated third-quarter results displayed solid improvement that leaves the firm on track to meet our full-year revenue expectations. We’re holding steady on our fair value estimate and consider shares of this narrow-moat company undervalued. Quarterly revenue rose 8% in constant currency, driven by strength in trauma and extremities, as well as sports medicine. As seen with other orthopedic devicemakers, Smith & Nephew’s shares came under significant pressure since late summer as investors became preoccupied by knock-on effects of the GLP-1 therapies for weight loss. Considering osteoarthritis is driven by a mix of genetic predisposition, joint trauma, and lifestyle factors influencing wear and tear in addition to weight, we think it’s unlikely that GLP-1 use will substantially reduce the demand for joint replacement. Because arthritis is a progressive disease, we think it’s more likely that GLP-1s could cause some patients to delay the need for joint replacement, but that many of them will eventually undergo procedures.