What Morgan Stanley thinks of Smith & Nephew's new CEO: 5 things to know

Written by Laura Dyrda | December 10, 2018 | Print  |

Morgan Stanley analysts recently upgraded Smith & Nephew to "overweight," predicting the company's new CEO will help "reinvigorate top-line performance," according to a Proactive Investor report.


Here are five things to know:

1. Smith & Nephew named Namal Nawana CEO in May, and the Morgan Stanley analysts already like what they see. According to the report, there are, "plenty of levers he has already started to pull which can push the company to the next level."

2. The ratings firm predicts Mr. Nawana will be able to boost the company's knee and hip replacement growth after years of stagnation. As a result, Morgan Stanley raised organic sales growth assumptions marginally for the next two fiscal years. The company made the move, "to reflect [its] growing conviction that core weakness in several underperforming divisions [are] being systematically addressed by the new CEO and his recent appointments."

3. The analysts predict 17 percent sales growth in 2019, which would mean the company's sales would hit $5.02 billion. The predicted earnings increase is 40 percent, raising earnings to $1.14 billion.

As quoted in the Proactive Investor report, the Morgan Stanley analysts said, "We see the investment case consisting of 1) Accelerating organic sales growth in underperforming categories; 2) Operational leverage driving up margins; 3) Valuation on 10-year lows of 20 percent relative to the peer group; and 4) Balance sheet operationally not in our forecasts."

4. In its analysis, Morgan Stanley also boosted Smith & Nephew's price target to reflect a 15 percent potential upside to the current share price.

5. Deutsche Bank also raised its target price for Smith & Nephew, but the company still saw shares drop 0.8 percent as of early Dec. 10.

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Orthopedic trauma devices market to hit $9.4B by 2020—3 insights

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