Smith & Nephew share price dips as JPMorgan trims stance

Shares in Smith & Nephew (LON:SN) have fallen into the red in London today, as JPMorgan lowered its stance on the artificial hips and knees maker. Proactive Investors quoted the analysts as commenting that the stock’s risk-reward was now more balanced following last year’s outperformance.

As of 10:44 GMT, Smith & Nephew’s share price had lost 2.22 percent to 1,431.50p, underperforming the broader market selloff which has seen the benchmark FTSE 100 index give up 0.94 percent to 6,664.69 points so far this morning. The group’s shares have added more than 13 percent to their value over the past year, as compared with about a 13.2-percent dip in the Footsie.

JPMorgan trims stance

JPMorgan Cazenove lowered its rating on Smith & Nephew from ‘overweight’ to ‘neutral’ today, and trimmed its price target on the shares from 1,487p to 1,477p.

“We believe the risk-reward from here is more balanced, with valuation less compelling and material upside likely requiring earnings’ upgrades. The most likely source of this is M&A, but we believe focus in the near term is more likely to be on smaller bolt-ons,” the analysts explained, as quoted by Proactive Investors, adding that in the near-term, they “expect FY19 FX headwinds that have not been fully captured to weigh a little on consensus estimates”.

The broker further pointed to the current US dollar/pound volatility which, they argue, implies ‘greater FX uncertainty’ than what would normally be expected at the beginning of the year.

Analysts lower forecast

JPMorgan further lowered their forecasts and now expect Smith & Nephew to deliver revenue of $4.99 billion and adjusted earnings per share of $0.98 for the current year.

The comments came after Morgan Stanley lifted its rating on the artificial hips and knees maker last month, arguing that the group’s new management should help reinvigorate top-line performance.

As of 10:54 GMT, Wednesday, 02 January, Smith & Nephew plc share price is 1,431.50p.