Smith & Nephew slumps as third-quarter revenue misses estimates

Smith & Nephew fell after its third-quarter revenue came in a little weaker than expected, as the maker of artificial hips and knees maintained its full-year guidance and announced the acquisition of robotics company Blue Belt Technologies.

For the quarter ended 26 September, the company reported a 4% rise in underlying revenue to $1.11bn on the back of above-market revenue growth in knee implants, a sustained improvement in the advanced wound care business and a good performance in the US.

Numis, which rates the stock at 'add', said revenue fell short of its estimate of $1.14bn and consensus expectations of $1.13bn.

Reported revenue was down 4% due to currency headwinds.

In addition, the company said it continues to expect to deliver higher underlying revenue growth in 2015 than in 2014 and an improvement in trading profit margin.

Chief executive officer Olivier Bohuon said: “We are pleased with our progress in 2015, with the third quarter again demonstrating that our actions are delivering a strong performance.

“We had a good quarter in the United States, our largest market, and are successfully stabilising our European business which delivered a second consecutive quarter of revenue growth against a market backdrop that remains challenging.”

Also on Thursday, Smith & Nephew said it has agreed to acquire Blue Belt Technologies, which works in orthopaedic robotics-assisted surgery, for $275m.

It said the deal was “a compelling strategic move” which reinforces the company’s “distinctive orthopaedic reconstruction strategy”.

Smith & Nephew, which expects revenue growth at Blue Belt to be in excess of 50% over the medium-term, said the transaction is expected to close around the end of the year.

Numis said that while the acquisition looks expensive at first glance, it provides a strategic positioning in the robotics market which is expected to become increasingly mainstream across hips and knee surgery in the coming years.

At 0915 GMT, shares were down 4.7% at 1,096p.