- Smith & Nephew has failed to make its recovery to pre-pandemic levels, although key segments are likely in a deferral rather than a long-term loss.
- Lack of visibility and guidance from management highlights the risks investors must factor in, and reflects the pricing activity we've observed YTD.
- We feel the company must put its strong balance sheet to effective use, to drive top-line earnings and push ROIC above current costs of capital.
- Cash runaway is sufficient for the next 2-year period in our view, and margin pressures will alleviate with operating leverage once the pandemic settles.
- We are neutral on the company, until further evidence can be provided on the growth vision outside of Covid-19 headwinds.
For further details see:
Smith & Nephew Holds The Line, But So Does Our Thesis