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On Thursday, Jefferies demonstrated confidence in Smith & Nephew PLC (SN:LN) (NYSE: SNN) shares by raising its price target from GBP 12.50 to GBP 14.00. The firm sustained its Buy rating on the stock, signaling a positive outlook on the company's financial performance.
The upgrade follows Smith & Nephew's solid second-quarter results in its Orthopaedics Sports Medicine & ENT (OSG) segment. The company is expected to maintain this momentum into the second half of the year, with particular growth anticipated in U.S. knees, Wound Biologics, and an additional two trading days in the fourth quarter.
The company's first-half margin was also a point of reassurance for investors, coming in at 16.7%, which is above the consensus estimate of 16.3%. This margin performance is seen as a factor that helps to mitigate the risks associated with the company's reiterated full-year 2024 guidance.
Management's ability to set reliable guidance has been viewed positively, restoring credibility. The new Chief Financial Officer (CFO) has also hinted at potential future benefits, including savings, share buyback programs, increased accountability, and improved return on invested capital (ROIC).
Jefferies believes that investors have an opportunity to benefit from a further re-rating of the stock. This optimism is based on expectations of improved top-line consistency, increased comfort with the company's margin target for 2025 and beyond, and a recovery in free cash flow (FCF).
InvestingPro Insights
As Smith & Nephew PLC (NYSE: SNN) garners a positive outlook from Jefferies, real-time data from InvestingPro provides additional context to the company's financial landscape. With a market capitalization of $13.36 billion and a high P/E ratio of 51.01, the company trades at a significant earnings multiple. However, the adjusted P/E ratio for the last twelve months as of Q4 2023 shows a more moderate figure of 26.73, indicating potential for investment consideration.
InvestingPro Tips suggest that Smith & Nephew's net income is expected to grow this year, aligning with Jefferies' sentiment on the company's performance. Moreover, the stock has shown a strong return over the last month, with a 17.42% price total return, which could be an attractive point for investors. Notably, the company has a history of maintaining dividend payments, having done so for 48 consecutive years, and offers a dividend yield of 3.14% as of the latest data.
For investors seeking further insights, additional InvestingPro Tips are available, providing a comprehensive analysis of Smith & Nephew's financial health and market position. With the next earnings date on August 1, 2024, interested parties can stay informed on the company's progress and make data-driven investment decisions.
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