July 26, 2018 / 6:24 AM / a year ago

Smith & Nephew buoyed by recovery in U.S. market

LONDON (Reuters) - Smith & Nephew’s new chief executive confirmed the company’s full-year guidance on Thursday after improvement in its U.S. market helped revenues for the artificial hip and knee maker to recover from a tough start to the year.

Second quarter revenue was up 2 percent on an underlying basis after the firm’s established markets returned to growth following weakness in the first quarter.

Smith & Nephew (SN.L) said underlying revenue growth for the year was still expected to be 2-3 percent, after it cut its outlook in its previous trading statement in May, one of the last acts of its previous CEO.

New boss Namal Nawana said that while Europe remained soft, there had been improvement in the United States, where the company derives about half of its revenues.

In all, established markets grew 1 percent on an underlying basis, having been down 2 percent in the previous quarter

Shares were up 3.4 percent at 0805 GMT, among the top FTSE 100 .FTSE risers, as analysts at Bank of America/Merrill Lynch said the results were "better than feared".

The medical technology firm, which also has wound-care and sports medicine units, is under pressure to improve margins and find new sources of growth as it competes with bigger rivals.

Analysts at JP Morgan Cazenove said though revenues were in-line with consensus estimates, margins were a little better than expected, resulting in an earnings beat.

The firm’s shares have long been propped up by takeover talk, amid speculation it could be acquired by a U.S. competitor such as Stryker (SYK.N) or be broken up. Smith & Nephew has a market value of around $15 billion.

Nawana most recently headed medical diagnostics firm Alere, where he oversaw its $5.3 billion sale to Abbott in 2017.

However, asked about possible bid interest in Smith & Nephew from others, he said that he was focused on accelerating growth within the business.

“My job’s really clear, which is to unlock the value of Smith & Nephew... we’ve got a great portfolio, and getting to market growth is a good start for us,” he told Reuters, although he added that the firm could be a buyer of others.

“We’ve got a very strong balance sheet. Smith & Nephew has done some M&A in the past, and there’s plenty of opportunity to do more of that going forward.”

Reporting by Alistair Smout; Editing by James Davey/Keith Weir

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