Smith & Nephew (SNN:NYSE) Reports Strong 3Q:04 Financials
BY JOHN CHOPACK, NOVEMBER 8, 2004
Smith & Nephew reported revenues of '288.9 million for the 3Q:04 which was a 12% increase over the 3Q:03 on a constant currency basis. Earnings for the 3Q:04 totaled '4.99p per share which was a 15% increase over the 3Q:03.
Orthopedic revenues totaled '126.5 million for the 3Q:04 which was a 19% increase over the 3Q:03 and 5% faster than the orthopedic revenue growth during the 2Q:04. Orthopedics continue to be the fastest growing segment within Smith & Nephew. Endoscopy sales totaled '72.2 million which was an 8% increase over the 3Q:03 and Wound management revenues totaled '90.2 million, 6% higher than the 3Q:03.
Growth in orthopedic revenues were driven by "continuing strong market conditions, particularly in the U.S.". Other revenue drivers included MIS knee instrumentation which helped support a 22% increase in knee revenues (25% increase in the U.S. and 16% O.U.S.). 3Q:04 growth in knee revenues was 6% higher than it was during the 2Q:04. Hip revenues grew by 15% during the 3Q:04 which was 1% higher than it was during the 2Q:04. Both hip and knee revenues continue to be driven further penetration of Oxinium product sales which now represent 40% of all hip and knee systems sold. Trauma revenues increased by 13% during the 3Q:04 (18% in the U.S. and 5% O.U.S.) driven by the establishment of a dedicated, exclusively focused trauma sales force within the U.S...
Future revenue drivers are expected to be the Company's femoral resurfacing device which is currently being marketed in Europe. Smith & Nephew recently filed its PMA with the FDA and said there a chance that the device could gain approval towards the end of 2005. Management indicated that femoral resurfacing products represent 12-15% of the overall U.K. hip market. Additionally, the Company is waiting to hear from the FDA regarding a ceramic-on-ceramic hip application. Management wouldn't comment specifically on when a ceramic hip approval could be granted.
Management indicated that it is comfortable with its previous guidance for mid-teen growth in revenues for 2004 driven by favorable market fundamentals and a seasonally stronger 4Q:04 for orthopedics and endoscopy revenues. Additionally, they expect EBITDA margins to be 21.5% for the 4Q:04. For 2005, management is anticipating Orthopedic revenue growth in the high teens and Endoscopy and Wound Management revenues to increase by a high single digit growth rate. This should help drive a mid-teens increase in earnings per share during 2005.
