Smith & Nephew plc Just Beat EPS By 26%: Here's What Analysts Think Will Happen Next

Shareholders of Smith & Nephew plc (LON:SN.) will be pleased this week, given that the stock price is up 16% to UK£13.45 following its latest interim results. It looks like a credible result overall - although revenues of US$3.0b were what the analysts expected, Smith & Nephew surprised by delivering a (statutory) profit of US$0.33 per share, an impressive 26% above what was forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

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Taking into account the latest results, the consensus forecast from Smith & Nephew's 17 analysts is for revenues of US$6.13b in 2025. This reflects a satisfactory 3.2% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to surge 38% to US$0.77. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$6.12b and earnings per share (EPS) of US$0.74 in 2025. So the consensus seems to have become somewhat more optimistic on Smith & Nephew's earnings potential following these results.

View our latest analysis for Smith & Nephew

There's been no major changes to the consensus price target of UK£13.23, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Smith & Nephew at UK£14.84 per share, while the most bearish prices it at UK£10.68. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Smith & Nephew's rate of growth is expected to accelerate meaningfully, with the forecast 6.5% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 4.7% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.7% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Smith & Nephew is expected to grow at about the same rate as the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Smith & Nephew's earnings potential next year. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Smith & Nephew going out to 2027, and you can see them free on our platform here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.