Smith & Nephew Poised for Upside in Transition to Growth Delivery, RBC Says

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Smith & Nephew's (SNN) risk-reward profile remains "skewed to the upside" as the company transitions from recovery mode to growth delivery, RBC Capital Markets said in a Monday note previewing the company's Capital Markets Day in December.

Upcoming guidance is expected to include a compound annual revenue growth rate of 5% to 6%, with Sport Medicine being a primary driver of mid-term growth, bolstered by steady progress in Wound Care and moderate growth in Orthopedics, RBC analysts said. They expect the company to provide earnings before interest and taxes margin expansion guidance of 2 to 3 percentage points, mainly driven by a recovery in Orthopedics, implying a low-single-digit upside to consensus at the midpoint.

With the company moving to stability after addressing operational challenges, its focus has now shifted to seizing longer-term opportunities, according to the note. The analysts said they are rolling forward their valuation on Smith & Nephew.

RBC reiterated the company' stock rating at outperform and raised the price target to 17 British pounds ($22.8) from 14 pounds.

Price: 36.39, Change: +0.05, Percent Change: +0.15

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