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Smith & Nephew shares plunged over 7% after the company cut 2018 full-year guidance from the expected 3-4% down to 2-3% range. The medtech company blames “mixed performance” in the US and other established markets, which saw negative underlying revenue growth (-2%).
Q1 group revenues may well have grown by 5%, but with underlying growth nearly flat, all of that windfall was due to FX movements. In particularly disappointing news, the company’s largest product SANTYL, delivered especially weak sales, meaning Advanced Wound Bioactives division revenue fell -12%.
There is still some love for Smith & Nephew products in the developing world (revenue +9%, ex-FX), which performed better than expected, and the company expects trading conditions in established markets to return to “more normal levels” later in the year. However, with US (45% revenue share) and other established markets (37%) making up almost 83% of company earnings, the question remains whether Smith & Nephew can improve revenues here enough.
After all, cutting guidance so early in the year implies quite a disappointment, and when referring to “more normal levels”, do they mean the “old normal” or the “new normal”?
Artjom Hatsaturjants, Research Analyst, 03 May 2018
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