Smith & Nephew misses the mark with 2016 results

Smith & Nephew (NYSE:SNN) today posted 2016 numbers that missed the consensus forecast, sending share prices down today in London and New York despite a net profit gain of more than 91%.

Europe’s largest large-joint implant maker reported 2016 trading profits of $1.02 billion, off by -7.2% compared with 2015, on 0.8% sales growth to $4.67 billion. Analysts were looking for trading profits of $1.04 billion on sales of $4.69 billion.

Net profits were $784 million, or 87.8¢ per share, a 91.2% increase over 2015. But adjusted to exclude 1-time items, earnings per share were 82.6¢ just shy of the 83¢ consensus.

Fourth-quarter sales were $1.22 billion, down -2.8% compared with Q4 2015 and also shy of the consensus forecast for revenues of $1.26 billion.

“Whilst we still delivered growth in 2016 it was not at the level we had wanted. However, I was pleased with our 2016 performance in areas such as sports medicine and knee implants, where we maintained strong momentum. Market conditions in China and the Gulf States together shaved more than a percentage point of growth off the group in 2016. China returned to growth in the 2nd half, as did the emerging markets as a whole,” CEO Olivier Bohuon said in prepared remarks. “I am confident we now have the right structure and capability in place and are focused on improving execution across the group, with a clear set of actions underway. Beyond this, with our innovative products and deep customer relationships, we are well set to deliver a stronger performance generating higher revenue growth and a better trading profit margin in the future.”

Smith & Nephew said it expects to improve its trading profit margin by 20 to 70 basis points this year, on sales growth of 1.2% to 2.2%.

Analysts at J.P.Morgan Cazenove said the midpoint of the guidance would lead to a -1.6% downgrade in revenue consensus, which stood at $4.82 billion, and around a -2% hit on trading profit forecasts.

SN shares were down -2.5% to £11.71 ($8.68) apiece today in London as of 5:40 am Eastern; in New York, SNN shares slid -2.1% to $29.98 apiece in pre-market activity.

($1 = €1.106; $1 = £1.349)

Material from Reuters was used in this report.

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