In key news on UK stocks, FTSE 100-listed Smith+Nephew PLC (GB:SN) shares gained over 7% as of writing, after activist investor Cevian Capital disclosed its 5% stake in the company. Following this disclosure, Cevian Capital becomes the second-largest shareholder in Smith+Nephew.
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Smith+Nephew is a medical technology company that specializes in a wide range of implants, wound dressings, and other surgical products.
Cevian Steps in to Rescue Smith+Nephew
Smith+Nephew was affected by the pandemic as demand for replacement surgeries was hit hard. Since then, the company has been struggling with supply issues, which have impacted its share price performance. Over the past 12 months, SN stock has declined by nearly 12%. Over the term of five years, it has dropped by 38.5%.
Despite this, Cevian believes there is potential to create significant long-term value by enhancing the company’s operating performance. Overall, the company has a fundamentally strong business with presence in emerging markets.
According to AJ Bell analyst Russ Mould, Cevian will pursue more ambitious goals and intends to ensure management accountability.
Positive Outlook
Smith+Nephew is now witnessing strong demand for its medical equipment, especially from older adults who are resuming surgeries that were postponed during the pandemic. In 2023, the company achieved revenue of $5.5 billion, marking a 7.2% year-over-year increase on an underlying basis, which exceeded expectations.
In its first quarter trading update, the company highlighted a strong start to the year and also maintained its full year revenue guidance. The company projects its underlying revenue growth between 5% and 6% (4.3% to 5.3% based on the exchange rates as of April 26, 2024) and a trading profit margin of at least 18.0%.
Are Smith & Nephew Shares a Good Buy?
According to TipRanks’ consensus, SN stock has received a Moderate Buy rating, backed by a total of eight recommendations. It includes five Buy and three Hold ratings. The Smith & Nephew share price forecast is 1,258.25p, which is 18.5% above the current trading levels.
