Broker snap: Smith and Nephew making strategic progress

3rd Aug 2012 11:09

Jefferies has raised its target price for medical devices maker Smith and Nephew from 740p to 780p and reiterated its 'buy' rating for the stock, saying that the group's first-half results showed that progress is being made on its strategic priorities."Smith & Nephew's 1H results demonstrated progress on the strategic framework announced one year ago," Jefferies said. The broker said that it is seeing the effects of cost savings in the previously "sacrosanct" orthopaedics division, a merger of divisions has been initiated without signs of disruptions. "We consider this encouraging for the longer-term initiatives to deliver innovation and greater share of sales from faster growing product areas and geographies."Meanwhile, S&N also beat the market's margin expectations, and Jefferies sees scope for the group to surprise to the upside in the second half.The broker says that the 50% increase in the total dividend - signalled by management in the conference call - "indicates that the board takes cash returns seriously."In the absence of major acquisitions over the next six-12 months, the board will again have to review its policy at 1H13 due to the strong cash position, which we view as a possibility."Shares were down 0.44% at 672p by 11:08 on Friday, following a strong rise the day before.BC