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Reaching £13.23 per share, the Smith & Nephew (LSE:SN.) share price surged 14.6% on Tuesday (5 August), making it the best-performing FTSE 100 share today.
The company — whose products include joint implants and wound care treatments — has swept higher after announcing forecast-beating profits for the first half. Not only that, but its data showed sales rapidly gain momentum as the period wore on.
Smith & Nephew shares are now trading at their most expensive since February 2022. Is the Footsie business a great turnaround stock for investors to buy? Or is it now looking too expensive?
Another forecast beat
The first half saw another standout sales performance as restructuring efforts rolled on. Revenues were up 5% on an underlying basis, at £3bn, with growth speeding up to 6.7% in Q2 from 3.1% in Q1.
Trading profit was up 11.2%, at £523m, while trading profit margin rose 100 basis points to 17.7%. This was driven by “revenue leverage and accelerated operational savings“, Smith & Nephew said.
Operating profit soared 30.6% to £429m.
Cash generated from operations rose 54.3% to £568m, while free cash flow soared to £244m from £39m in the same 2024 period.
Reflecting this cash boost, the company raised the interim dividend 4.2% year on year, to 15 US cents per share. It also announced a $500m share buyback to commence in the second half of 2025.
Broad strength
Smith & Nephew maintained full-year guidance, but as today’s share price jump shows, those first-half results were nothing short of exceptional.
Each of the company’s regions and divisions delivered handsomely. Orthopaedics sales were up 5% on an underlying basis, at $615m. Sales at Sports Medicine and ENT, and Advanced Wound Management were up 5.7% and 10.2% respectively, at $479m and $459m.
For the full year, it expects to deliver underlying revenue growth of 5%, thanks to “[a] continued higher cadence of product launches and clinical evidence to underpin further growth“.
Trading profit margin’s tipped at between 19% and 20% as the firm’s ’12-Point Plan’ restructuring initiative continues.
What next?
Smith & Nephew’s transformation strategy launched in 2022 is delivering the goods pretty nicely. Steps to improve efficiency are paying off, while sales at Sports Medicine and ENT, and Advanced Wound Management are getting better.
Efforts to fix the underperforming Orthopaedics unit are also showing signs of promise. Though it’s important to note too that performance here remains mixed — in the key US market, hip implants were up 7.4% in the first half but knee implants fell 1.5%.
Tuesday’s update marks the second successive quarterly beat. As a consequence, Smith & Nephew’s shares are up by a third in 2025. Investors are hoping the company is shaping up to finally be in a strong place to capitalise on rising healthcare demand as global populations rapidly age. This is an enormous growth opportunity.
However, it’s also important to remember that risks to its turnaround still loom. Trade tariffs are taking a bite out of the bottom line. An economic downturn in the US, and recent changes to procurement policy in China, are other threats.
On balance, I think Smith & Nephew shares are worth serious consideration today. Its price-to-earnings (P/E) ratio has risen to 16.5 times, though it’s still below the 10-year average of 18 times.
