Berenberg raises target price on Smith and Nephew

Berenberg highlighted that Smith & Nephew's revenues were down 47% on an underlying basis in April but the analysts said with "a gradual resumption" of elective surgery looking imminent, they think that drop will mark the low and that a return to near-normal levels of business activity in 2021 looked "increasingly likely".

Thereafter, the German bank expects the company to pick up where it left off and deliver sustained, above-market revenue growth, expand margins and improve earnings growth.

"We expect an 11% 2021-2025E EPS CAGR. With the shares at 18.8x our 2021E adjusted EPS, they are not, in our view, pricing in this earnings growth outlook," said Berenberg, which also reiterated its 'buy' rating on S&N.

Berenberg also stated that the increase in its DCF-derived price target related to the "slight recent strengthening" of the US dollar.