Smith+Nephew Plc (LSE:SN.) reported fourth-quarter revenue ahead of market expectations on Monday but cautioned that its 2026 trading profit outlook of roughly $1.3 billion will be affected by a recent acquisition and changes to U.S. reimbursement policies impacting its wound bioactives segment.
Fourth-quarter revenue reached $1.70 billion, exceeding consensus forecasts by 1.6%, while underlying growth came in at 6.2% — around 150 basis points above expectations. Company-compiled consensus estimates had projected 2026 trading profit of $1.27 billion, compared with management guidance of about $1.3 billion.
The medical technology group said its acquisition of Integrity Orthopaedics, completed on January 21, 2026, involved an initial payment of $225 million with up to an additional $225 million tied to performance milestones. The deal is expected to slightly dilute trading profit in 2026, be broadly neutral in 2027 and become earnings accretive by 2028.
The Orthopaedics division delivered its strongest quarterly performance in more than two years, posting underlying growth of 7.9%, ahead of RBC Capital Markets’ 5% forecast. U.S. Knee Implants recorded underlying growth of 3.6%. Management indicated that the first quarter of 2026 could be softer as the company makes strategic adjustments ahead of the planned second-half launch of the LANDMARK Knee System.
Advanced Wound Management reported underlying growth of 2.8%, falling short of RBC Capital Markets’ expectation of 5.5%. Within the segment, Advanced Wound Bioactives revenues declined 0.2% on an underlying basis against a strong comparison period. The company expects U.S. reimbursement changes affecting its skin substitutes portfolio to create an additional earnings headwind of between $20 million and $40 million in 2026.
Sports Medicine and ENT delivered underlying growth of 5.2% during the quarter despite a 250-basis-point drag from China. ENT grew 2.3% underlying as the market prepared for the rollout of China’s Volume-Based Procurement programme, which alone reduced growth by 530 basis points. Excluding China, Sports Medicine and ENT expanded by 9.5%.
For the full year, Smith+Nephew generated revenue of $6.16 billion, representing underlying growth of 5.3% compared with $5.81 billion in 2024. Trading profit increased 15.5% to $1.21 billion, lifting the trading margin by 160 basis points to 19.7%.
Operating profit rose 20.7% to $794 million, while free cash flow improved to $840 million from $551 million in 2024, supported by a one-off $26 million benefit from a property transaction. Adjusted earnings per share climbed 21% to 102 cents.
Revenue from China declined to $128 million in 2025 from $210 million the previous year, and tariffs are expected to create an additional headwind of roughly $60 million in 2026.
Chief Executive Deepak Nath said the company had “transformed Smith+Nephew into a fundamentally stronger business” through its 12-Point Plan, adding that its new RISE strategy was “our roadmap to Reach more patients, unlock new categories through strategic investment, and Execute efficiently.”
Looking ahead, Smith+Nephew expects underlying revenue growth of around 6% in 2026, with reported growth of approximately 7.8% based on exchange rates as of February 2026. Free cash flow is forecast at about $800 million, and the company reaffirmed its medium-term targets of 6–7% annual revenue growth and 9–10% compound annual trading profit growth through 2028.
RBC Capital Markets, which maintains a “sector perform” rating and a 1,350 pence price target, said it did not consider the results sufficient to fully support the company’s 2026 outlook, warning of “a material risk of guidance downgrades through the year.”
The board proposed a final dividend of 24.1 cents per share, bringing the total annual payout to 39.1 cents — an increase of 4.3%. Adjusted net debt to EBITDA stood at 1.7 times at the end of the year.
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