Will Smith & Nephew plc Surge Past GlaxoSmithKline plc, AstraZeneca plc And Shire PLC After Full Year Results?

Does Smith & Nephew plc (LON:SN) (LSE:SN.L) have more investment appeal than GlaxoSmithKline plc (LON:GSK) (LSE:GSK.L), AstraZeneca plc (LON:AZN) (LSE:AZN.L) and Shire PLC (LON:SHP) LSE:SHP.L)?

Smith & Nephew plc
Smith & Nephew plc

Smith & Nephew plc (LON:SN) (LSE:SN.L) has released full year results to the stock market today. Revenue increased 1% to $4669 million, which included a negative forex impact of 1%. Underlying revenue increased 2%. EBIT margin of 17.2% and trading profit margin of 21.8% reflect previously disclosed transactional forex headwind, the loss of leverage from lower sales growth and the investment in Blue Belt.

Guidance for 2017 includes an improved revenue performance. Reported revenue is forecast to rise between 1.2% and 2.2% at prevailing forex rates, while underlying revenue is expected to rise 3%-4%. An improvement in the 2017 trading profit margin is also expected, in the 20-70 basis points range.

Challenging conditions in China and the Gulf states together knocked more than a percentage point off Smith & Nephew’s revenue growth in 2016. However, China returned to growth in H2, as did emerging markets as a whole. Sports Medicine and Knee Implants saw positive performance and maintained strong momentum.

In the three months, shares in Smith & Nephew have outperformed healthcare stocks such as GlaxoSmithKline plc (LON:GSK) (LSE:GSK.L), AstraZeneca plc (LON:AZN) (LSE:AZN.L) and Shire PLC (LON:SHP) LSE:SHP.L). Smith & Nephew is up 2%, while Shire is down 7% and shares in AstraZeneca and GlaxoSmithKline have fallen 1% apiece.

In my view, Smith & Nephew offers more stability than Shire, GlaxoSmithKline and AstraZeneca. Its performance in 2016 was disappointing in my opinion, but I think it has made the required changes to position itself for future growth. I’m relatively cautious about the prospects for UK shares and the global stock markets this year, since I feel there are numerous challenges facing GDP growth.

Therefore, a stock such as Smith & Nephew could offer some respite against the uncertainty which investors face. While its shares are down 4% today and investors have not reacted positively to its update, I think it has long term investment appeal. I’m positive on the likes of AstraZeneca, GlaxoSmithKline and Shire, too. But in terms of stability, I think Smith & Nephew could be the most appealing stock.

About Robert Stephens 3883 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page