JPMorgan cuts Smith & Nephew after outperformance

JPM noted that the shares significantly outperformed last year, up 12% in absolute terms, outperforming the FTSE by 25 percentage points and the European Medtech sector by 22 percentage points.

This in part reflected the low starting point for the shares at the beginning of the year, but after a slow start following a first-quarter profit warning, growth improved in Q3, with the rebound in hips and improved margin guidance being perceived as early progress driven by the new CEO, JPM said.

As a result, it now reckons the risk-reward from here is more balanced, with valuation less compelling and material upside likely requiring earnings upgrades.

"The most likely source of this is M&A, but we believe focus in the near term is more likely to be on smaller bolt-ons. In the near term, we expect FY19 FX headwinds that have not been fully captured to weigh a little on consensus estimates."

At 1025 GMT, the shares were down 2% at 1,434p.