The Motley Fool

Why is the Smith & Nephew share the biggest FTSE 100 gainer today?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Hand flip wooden cube with word wealth to health.
Image source: Getty Images

The UK’s headline index may be going nowhere in today’s trading, but some stocks are running up fast. One of them is the FTSE 100 healthcare company Smith & Nephew (LSE: SN)

The Smith & Nephew share price is up 6.3% this afternoon, making it today’s biggest index gainer, at least for now. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Strong trading statement buoys the Smith & Nephew share price

This jump follows the company’s latest trading statement, as per which its reported revenues rose by 11.5% to $1.3bn in the first quarter (Q1) of 2021. Its double-digit revenue increase has been helped by a currency impact, but even without it, the company’s underlying revenues grew by 6.2%.

Orthopaedics slows down growth

Smith & Nephew’s operations are divided into three parts, which are orthopaedics, sports medicine & ENT, and advanced wound management.  

Orthopaedics is its biggest revenue generator, with a 43% share in total. Under this segment, it provides the necessary implants required for elective surgeries like knee and hip replacements. The company’s revenues softened last year as these operations were deferred during the pandemic. 

Even now, its knee implants’ segment, which in turn is the biggest revenue generator within orthopaedics, is still weak. It shrank by 10.3% as per the latest numbers, dragging down overall orthopaedics growth to 1.6%. 

The company says that this is due to reprioritisation towards hip implants, which are more urgent. I think this suggests that we can expect a pick up in knee implants as the pandemic recedes, which is a positive for Smith & Nephew. 

Both its sports medicine and advanced wound management segments have grown by a robust 10.3% and 9.3% respectively, on an underlying basis. 

Robust outlook

Smith & Nephew’s outlook is even more robust than its Q1 performance. On an underlying basis, it expects revenue to grow by 10% to 13% in 2021. This means that, conceivably, revenue could be double that seen in Q1. Further, on a reported basis, it expects an increase of 14.8% to 17.8%.  

Smith & Nephew’s biggest market is the US, accounting for around half its revenues. Growth is really back with a bang in this economy. Fast progress is likely over the rest of 2021 as well. With vaccinations underway at speed, I think the company is poised to make gains from the market. 

The flip-side

The flip-side is that the pandemic is not truly over. New variants are causing fresh havoc. And Smith & Nephew is a unique healthcare provider, which does not have the quality of other defensive shares because it caters to a relatively non-urgent category of healthcare requirements. In comparison, pharmaceutical companies like AstraZeneca focus on severe diseases like cancer. As a result, it does not meet the criteria of a safe stock during economic slowdowns.

My takeaway

Other than this, though I think the Smith & Nephew share does not have many other challenges I can see at present. With continued share price weakness since the market crash of 2020, it is a buy for me.  

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has recommended Smith & Nephew. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.