SNN - Smith & Nephew stock rises as Q4 revenue grows sees macro headwinds in FY23

Smith & Nephew ( NYSE: SNN ) stock rose ~6% on Tuesday after Q4 revenue grew and the company provided FY23 outlook.

Q4 revenue grew 1.4% Y/Y to ~$1.37B.

Revenue from Orthopaedics segment fell -0.4% Y/Y to $549M, while revenue from Sports Medicine & ENT grew +3.3% Y/Y to $430M. Advanced Wound Management revenue increased +1.9% Y/Y to $386M.

The U.K.-based medical device maker said Orthopaedics saw revenue growth of +4.1% underlying in Q4. Excluding China, where growth continued to be impacted by the implementation of a previously disclosed hip and knee VBP program, the segment grew +5.3% underlying.

However, the headwind to growth from VBP will continue until Q2 2023, according to the company.

In July 2022, the company announced a 12-point plan aimed at fixing the Orthopaedics franchise , improving productivity, and grow more in well-performing Advanced Wound Management and Sports Medicine & ENT franchises, SNN noted.

For 2022 CEO Deepak Nath said, "We continued to outperform in Sports Medicine & ENT and Advanced Wound Management and, even though we are early in our work to fix Orthopaedics, performance improved here too."

Regarding productivity under the 12-point plan, the company noted that in total, its actions are expected to result in more than $200M of annual savings by 2025.

For the full year 2022 revenue was largely flat at $5.21B. Adjusted EPS was 81.8 cents (163.6 cents per ADS), compared to 80.9 cents in 2021.

Dividend : The board also recommended a final dividend of 23.1¢ per share (46.2¢ per ADS).

Buyback : The company noted that its 2022 share buyback program began in February 2022 and $150M was completed by Aug. 12, 2022. However, the board decided to delay further buybacks due to macroeconomic conditions, including higher inflation, until conditions improve.

Outlook :

"We will continue to face macroeconomic headwinds in 2023. However, I believe the drivers of further growth are in place, including leading technologies across all three franchises and a clear path to improved execution in Orthopaedics," added Nath.

For 2023 : The company expects underlying revenue growth in the range of 5.0% to 6.0% (5.0% to 6.0% reported). Meanwhile, Trading profit margin is expected to be at least 17.5%.

Midterm targets updated: SNN is aiming 5%+ underlying revenue growth driven by return on innovation investments and carrying out of the 12-point plan; and trading profit margin expansion to at least 20% in 2025 mainly due to productivity improvements.

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