Smith+Nephew Shares Dip AFter Strong 2025 Results, Cautious 2026 Outlook

Smith+Nephew (LON: SN.), a global medical technology business, reported its fourth quarter and full-year 2025 results, showcasing a strong finish to its 12-Point Plan.

Despite the positive momentum, shares reacted negatively, dropping 4.8% following the report's release.

The company's full-year revenue reached $6.164 billion, a 6.1% increase compared to $5.810 billion in 2024. Underlying revenue growth, which excludes the impact of currency fluctuations, was 5.3%. Notably, excluding China, underlying revenue growth climbed to 7.0%.

Operating profit saw a significant jump, increasing by 20.7% to $794 million, resulting in an operating profit margin of 12.9%, up from 11.3% the previous year. Earnings per share (EPS) also surged, rising 52.8% to 72.1 cents.

Cash generation was a highlight, with cash from operations increasing by 24.4% to $1.549 billion. Free cash flow experienced a substantial 52.5% increase, reaching $840 million. A $500 million share buyback was completed in the second half of 2025, reflecting the company's strong cash position.

The board increased the full-year dividend by 4.3% to 39.1 cents per share.

CEO Deepak Nath stated, “I am pleased that a strong fourth quarter helped us meet or exceed our 2025 targets for revenue growth, profitability and cash generation.” He further added that the RISE strategy is the company's roadmap to Reach more patients, unlock new categories of Innovation, Scale through strategic investment, and Execute efficiently.

Key Growth Drivers:

• Newer Products: Strong performance driven by recently launched products across all business units.
• Orthopaedics Recovery: Orthopaedics delivered its strongest quarter of revenue growth in over two years, with underlying revenue growth of 7.9%.
• Strategic Acquisitions: Completion of the Integrity Orthopaedics acquisition, supporting growth in Sports Medicine.

Smith+Nephew anticipates underlying revenue growth of around 6% for 2026. Trading profit is projected to reach approximately $1.3 billion, factoring in the dilutive impact of the Integrity Orthopaedics acquisition, which is expected to be marginally dilutive in 2026, broadly neutral in 2027, and accretive in 2028. Free cash flow is forecasted to be around $800 million.

Adjusted Return on Invested Capital (ROIC) is expected to exceed 10%, excluding the impact of the Integrity Orthopaedics acquisition.