Skip to Content

Smiths Group PLC ADR SMGZY

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
Is it the right time to buy or sell?
Find out with Morningstar Premium
Is it the right time to buy or sell?
Find out with Morningstar Premium

1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Smiths' Fiscal 2020 Results In Line, but End Markets Remain Challenged by COVID-19 Restrictions

Analyst Note

| Denise Molina, CFA |

Smiths Group reported in-line full-year 2020 results with a 1% decline in organic revenue and adjusted EBIT margin down 200 basis points to 15%. However, the shares sold off 8% after the release with management declining again to provide guidance, in contrast to some other industrial companies. The underlying difference relative to peers is that around 40% of Smiths' revenue is tied to capital spending by airport operators and the energy sector. We expect the demand recovery to be slow for the company's end markets and forecast a return to revenue growth only in 2024, with just a 0.5% revenue compound annual growth rate for 2019-23. However, we see value in the shares, which trades at a 22% discount to our GBX 1,690 fair value estimate. Growth will come from a return to normal oil consumption levels and airport operators upgrading luggage scanners to analyse liquids and electronic equipment inside luggage. Our narrow moat rating is intact.

Read Full Analysis

Company Profile

Business Description

With its start as a London jeweler in the 19th century, Smiths Group has for most of its history operated as a company operating disparate but economically attractive businesses. Thematically, it runs businesses that manufacture niche products in security- or safety-sensitive industries. Today, Smiths Group is split across five divisions: mechanical seals, medical supplies, weapons detection, electrical connectors, and specialized hoses. The end customers for these products include NASA, government security or defense departments, and hospitals. Medical is slated for a sale or spin-off.

Contact
11-12 St James’s Square, 4th Floor
London, SW1Y 4LB, United Kingdom
T +44 2070041600
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings
Fiscal Year End Jul 31, 2021
Stock Type
Employees 22,964