UK-based Smiths Group PLC (GB:SMIN) is under pressure from activist investor Engine Capital to initiate a strategic review, potentially leading to a breakup. Engine Capital, which holds a 2% stake in Smiths Group, believes that selling the entire company or its four divisions could result in a substantial premium to the current share price. SMIN stock gained over 4% as of writing.
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Smiths Group is a multinational engineering company with operations spanning over 50 countries. The company operates through four divisions: John Crane, Smiths Detection, Smiths Interconnect, and Flex-Tek.
Engine Capital Calls for a Bold Move
In its letter to Smiths, Engine Capital stated that it believes in the company’s significant value, which is not fully realized because of its conglomerate structure. The investor further asserted that Smiths has consistently been valued lower than the combined worth of its parts and its competitors, even though it has strong financials and solid performance. As a result, Engine Capital feels that the board should explore various strategic options to maximize shareholders value.
Additionally, Engine Capital advised the company to avoid making large acquisitions under its current structure, as this could introduce significant risk and result in a loss of value.
Analysts Remain Bullish on SMIN Stock
Earlier this week, Smiths Group raised its full-year organic revenue growth forecast to 6-8%, up from the previous estimate of 5-7%. The company stated that this upgrade reflects its strong overall performance, especially in Smiths Detection and Smiths Interconnect during Q2 FY25.
Following the update, analysts at Kepler Capital, Goldman Sachs, and Jefferies reiterated their Buy ratings on SMIN stock. Analyst Andrew Douglas from Jefferies praised the upgraded guidance and noted that it highlights Smiths Group’s resilience and potential to outperform its competitors amid mixed market conditions.
Is Smiths Group a Good Buy?
On TipRanks, SMIN stock has received a Moderate Buy rating based on five Buy and three Hold recommendations. The Smiths Group share price target is 2,037.73p, which implies a change of 10.8% in the share price.
