Smith & Nephew PLC (SN.L): 2Q/H126 below; FY26 top-line guidance lowered, trading profit outlook unchanged but lowered on underlying basis; Buy

Research evidence excerpt

Smith & Nephew PLC (SN.L): 2Q/H126 below; FY26 top-line guidance lowered, trading profit outlook unchanged but lowered on underlying basis; Buy

Smith & Nephew PLC (SN.L)

04 August 2026 Citi Research

By region, the US -1.3% in the quarter, other established markets +1.7%, and EMs

+10.6% (with China +DD).

Trading profit c.3% below consensus and c.1% below Citi excl. tariff refund

benefits — Trading profit margin excl. tariff refund benefits of c.US$35mn was

c.30bps below consensus and c.5bps below Citi.

2026 top-line guidance lowered, trading profit outlook maintained incl. tariff

refund benefits — S&N now expects 2026 org. sales growth of c.4% or c.5.2%

reported (from c.6% organic / c.7.7% reported previously) vs. VisibleAlpha consensus

5.2% organic and Citi 5.0% organic. This is based on the following 2H26

assumptions: 1) trajectory in US Hips and Knees improves, 2) SANTYL returns to

growth and skin substitutes stabilize, 3) REGENETEN and FASTSEAL supports

continued momentum in Sports medicine.

The company still expects org. trading profit growth of c.8%. Including Integrity

Orthopedics, S&N still expects 2026 trading profit to be c.US$1.3bn vs. consensus

US$1.29bn and Citi US$1.26bn, but we note 1) this now includes c.US$45mn of tariff

refunds, which is expected to offset the incremental tariff headwind this year, 2)

headwind from US skin substitutes reimbursement at the upper end of the

incremental US$20-40mn range, 3) US$50mn increase efficiency savings.

In terms of technical guidance, S&N reiterated 19-20% tax rate (consensus 19.4%

and Citi 19.5%), adj. other finance costs of US$10-15mn (consensus c.US$12mn and

Citi c.US$10mn), and adj. income from associates of US$15-20mn

(consensus c.US$6mn and Citi c.US$17mn). S&N increased adj. NFI to c.US$125mn