Smith & Nephew Earnings: Consistent Operational Improvement Is Paying Off

Smith & Nephew’s fourth-quarter performance offered a solid finish to 2023. With full-year results largely consistent with our expectations and our 2024 estimates bounded by management’s outlook, we’re leaving our assumptions and fair value estimate unchanged, although we plan to adjust the local shares for foreign-currency movement. The firm continues its blocking and tackling that has returned the orthopedics business to growth and bolstered results in sports medicine and advanced woundcare. This remains a work in progress, and we anticipate the firm to reap rewards in 2024 and 2025. We see little to change our view of Smith & Nephew’s narrow economic moat. Though the firm is considerably smaller than rivals Stryker, Zimmer Biomet, and Johnson & Johnson, it still benefits from high switching costs.