Analyst Note| Alex Morozov |
Narrow-moat Smiths Group's late-2023 performance was impressive, resulting in full-year 2023 organic revenue growth of 11.6%, eclipsing its most recent guidance of 10%. Consequently, Smiths Group’s delivery of full-year EBIT of GBP 501 million tracked 5% ahead of our forecast. Operating margins expanded 20 basis points to 16.5%, also in line with management's expectation of moderate margin expansion. Following a bumper year in 2023, Smiths Group expects organic revenue growth to slow in 2024—guiding in the range of 4% to 6%, in alignment with its medium-term target range—while also expecting modest profit margin expansion. We are yet to update our financial estimates to reflect Smiths Group’s revised guidance and other recent developments. Nonetheless, we maintain our fair value estimate of GBX 1,700.