Smith & Nephew (LON: SN.), the medical devices maker known for joint replacements and wound care products, saw its shares fall sharply this morning after it cut its full-year revenue growth guidance from around 6% to around 4%, even as first-half profit and margins improved.
The stock dropped roughly 7% in early trade to around 1,113p, against Monday’s close of 1,197p, with an intraday low of 1,102p and a high of 1,138p on volume of over 1.7 million shares.
The company’s H1 results, published this morning, showed underlying revenue growth of just 2.3% for the half and 1.6% in the second quarter, both softer than expected. Management pointed to weakness in US Orthopaedics, where Knee Implants sales fell 7.2% and Hip Implants fell 1.5% in the quarter, plus a 12.7% decline in Advanced Wound Bioactives, skin-substitute products hit by changes to US reimbursement rules. As a result, full-year revenue growth guidance was cut to around 4%, with second-half growth now expected at 5.0% to 5.5%.
The revenue miss overshadowed stronger profit numbers. Trading profit, the group’s core measure of operating performance, rose 8.1% to $566m, with trading margin up 60 basis points to 18.3%, while adjusted earnings per share rose 11% to 47.7 cents. The company reaffirmed its guidance for around 8% trading profit growth, roughly $800m of free cash flow and a return on invested capital above 10% for the full year, helped by an extra $50m of efficiency savings, taking the total to around $200m.
Chief executive Deepak Nath said the improved resilience gave the company confidence in delivering its full-year guidance for trading profit, cash flow and returns, adding that “Orthopaedics is not where we want it to be, but we expect growth to accelerate as we fill portfolio gaps, starting later this year and continuing into 2027.”
The market’s reaction shows that a growth downgrade can dominate a share price move even when profit and cash guidance are unchanged. The interim dividend was raised 4% to 15.6 cents per share.