Smith & Nephew (LSE:SN.) has cut its full-year underlying revenue growth guidance to around 3%, down from around 4%, after weaker-than-expected US Hips and Knees performance weighed on third-quarter results.
The London-listed medical devices group, known for its orthopaedic implants, sports medicine and wound care products, reported third-quarter revenue of $1,551 million for the quarter ended 26 September, up 3.4% on both an underlying and reported basis from $1,501 million a year earlier.
Trading profit growth guidance was also lowered, to around 4% from a previous "around 8%", with trading profit now expected to be around $1.25 billion versus a prior $1.3 billion goal. Free cash flow guidance eased to around $750 million from around $800 million, though trading cash conversion remains expected at around 95%, in line with original guidance.
Sports Medicine & ENT led the quarter with revenue up 8% to $507 million, including double-digit growth in Sports Medicine Joint Repair, while Advanced Wound Management improved sequentially on acceleration in its Devices segment.
Orthopaedics returned to growth, up 2.5% on an underlying basis to $590 million, but US Knee Implants revenue fell 7.3% on both underlying and reported bases, which the company attributed primarily to the ongoing impact of previously lost business rather than new losses, alongside market softness.
US Hip Implants revenue declined 1% on both bases, with the company citing the pace of deploying its CATALYSTEM sets as a constraint on converting and retaining legacy hip customers.
"We have revised our full-year guidance to reflect the slower growth in US Orthopaedics, which we expect to continue through the fourth quarter," said Deepak Nath, chief executive officer, adding that the group remains confident in delivering profit growth ahead of revenue growth alongside strong free cash flow and cash conversion.
Adjusted return on invested capital guidance was cut to around 9% from "more than 10%", excluding the impact of the Integrity Orthopaedics acquisition, which the company said is expected to be marginally dilutive to trading profit in 2026.
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Smith & Nephew confirmed it had approached Johnson & Johnson earlier in the year as part of a review of strategic options for its Orthopaedics business, and that discussions subsequently took place but have now ended.
The company said it continues to prioritise investment in its higher growth and margin Sports Medicine and Advanced Wound Management businesses, while continuing "to actively explore the full range of strategic options" for Orthopaedics.
Its $500 million share buyback, announced on 6 May, remains on track, with $250 million completed by the end of the third quarter.
During the quarter, the cementless version of its new LANDMARK Total Knee System received 510(k) clearance from the US Food and Drug Administration, with first US surgical cases completed, while the company also completed first femoral cases using its TESSA Spatial Surgery System and submitted a regulatory application for its use in tibial tunnel placement.
Full-year results for the fourth quarter and 2026 are scheduled for release on 1 March 2027.