CR - Smiths Group Has Held Up Well But Major Uncertainties Remain

• The value of aftermarket business to the John Crane segment of Smiths Group really stood out this quarter, though weak decrementals on a modest revenue decline was a disappointment.
• The fate of Medical is still uncertain; after years of failed attempts to sell the business, an IPO or spin-out is the next step.
• A new restructuring effort could boost operating margin by two points or more, but driving operating leverage from the business has proven challenging in recent years.
• Smiths shares look undervalued on single-digit revenue growth, but the uncertainty around Medical and the possibility of further revisions to John Crane estimates are risks to consider.

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