Smith & Nephew (SN) Q3 2024 TU earnings summary

Executive summary

• Q3 2024 underlying revenue grew 4.0% year-over-year to $1,412 million, with established markets, especially the US, showing strong momentum, while China presented significant headwinds due to VBP and weaker demand, reducing overall growth by 190bps.

• The 12-Point Plan continues to drive operational improvements, product availability, and commercial execution, particularly in Orthopaedics and Sports Medicine, embedding cultural change and delivering financial gains.

• Innovation and new product launches, such as CATALYSTEM, Q-FIX Nautilus, and TOTAL ANKLE Patient-Matched Guides, contributed to growth, with nearly half of 2023 revenue growth from products launched in the last five years.

• Advanced Wound Management posted its strongest quarter of the year, with all segments performing well.

Financial highlights

• Q3 revenue was $1,412 million, up 4.0% year-over-year, with no foreign exchange impact; US revenue grew 4.0%, Other Established Markets up 6.8%, and Emerging Markets flat at -0.1%.

• Orthopaedics revenue reached $549 million (+2.3% underlying), with US Hips up 3.2% and US Knees up 0.7%, but China remained weak.

• Sports Medicine & ENT revenue was $441 million (+3.9% underlying), with Arthroscopic Enabling Technologies up 15% and ENT down 6.8% due to tough comps.

• Advanced Wound Management delivered $422 million (+6.5% underlying), led by double-digit growth in Devices and Bioactives.

• Nine-month revenue totaled $4,239 million, up 4.2% underlying from the prior year.

Outlook and guidance

• Full-year 2024 underlying revenue growth expected at 4.5%, revised down from prior 5%-6% guidance, mainly due to China headwinds.

• Trading margin for 2024 expected to expand up to 50 basis points from last year's 17.5%; 2025 margin now guided at 19%-20%, revised down from 20%+ due to China VBP and volume headwinds.

• Q4 expected to accelerate due to Recon improvement (ex-China), stronger Trauma & Extremities, and two extra trading days.

• Margin accretion anticipated in 2026 and 2027.