In a note to investors, Wells Fargo analyst Larry Biegelsen said that Medtronic would only enter a new market it believes it can be a top player in. Smith & Nephew's hip and knee business is not large enough to make Medtronic a top player in the market according to the analyst. Biegelsen also said that Medtronic does not seem eager to use a Smith & Nephew acquisition to take advantage of a tax reduction.
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TheStreet Ratings team rates SMITH & NEPHEW PLC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate SMITH & NEPHEW PLC (SNN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 49.40% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SNN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Health Care Equipment & Supplies industry average, but is less than that of the S&P 500. The net income increased by 4.9% when compared to the same quarter one year prior, going from $143.00 million to $150.00 million.
- SNN's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The gross profit margin for SMITH & NEPHEW PLC is currently very high, coming in at 83.88%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.97% is above that of the industry average.
- SMITH & NEPHEW PLC has improved earnings per share by 6.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SMITH & NEPHEW PLC reported lower earnings of $3.08 versus $4.02 in the prior year. This year, the market expects an improvement in earnings ($4.09 versus $3.08).
- You can view the full analysis from the report here: SNN Ratings Report