Liberum upgrades Smith & Nephew to 'buy'

"While some may say they can hear the sound of a stable door closing in the distance, we don’t think the horse has got that far yet and we are turning buyers on SN," the broker said.

It said it was a holder of the stock previously on the basis that it feared it would take longer than expected for the company to turn around the orthopaedics division and that the targets in the market didn’t reflect that risk.

Liberum said S&N has largely addressed its concerns.

"To be clear we don’t think that SN is out of the woods yet - we remain of the view that the turnaround in orthopaedics will take time and there is clearly plenty of execution risk around delivering the margin improvements - but we feel that SN has now set a much more realistic set of targets and given a lot more granular detail on how it will achieve those targets, which has given us a lot more confidence in its ability to deliver."

It added: "Yes, there is still execution risk, but with the shares still trading on low EBITDA multiples this is more than priced in."