Smith & Nephew (SNN)
is a U.K. manufacturer of medical equipment. This stock could fill the niche if an investor is looking for global exposure to the healthcare industry in a low volatility stock.
Smith & Nephew divides its medical products and sales into three segments: orthopedics, endoscopy, and advanced wound management. Orthopedics account for about 50 percent of sales and 55 percent of profits. The other two segments close to evenly split the balance of sales and profits.
The company trades on the New York Stock Exchange as an ADR with each ADR share representing five London-traded shares. This is an important fact because the company will report financial results in U.S. currency with earnings per U.K. share.
For the first half of 2011, Smith & Nephew reported revenues of $2.13 billion, up from $1.95 billion for the same period of 2011. Adjusted net income per ADR share was $1.82, up from $1.80 a year earlier. A 33 cents per ADR dividend was paid for the first half of the year. The consensus earnings estimate for full year 2011 is $3.78 compared to $3.67 earned in 2010.
Scant U.S. following
Shares of Smith & Nephew have a very low institutional following in the United States. The result is just 4 percent of the ADR units is in institutional hands. Only a couple of U.S. analysts follow this company.
The stock exhibits a low level of volatility, with a current beta of 0.56. The company provides investors with healthcare exposure to emerging markets, which is where Smith & Nephew management is focusing the company's growth strategy. Smith & Nephew management has provided steady, if unremarkable, revenue and profit growth over the last five years.
In the United Kingdom, about 25 analysts follow the stock and at the current time 14 of those analysts have Smith & Nephew rated as either a buy or strong buy. Most of the remaining analysts are neutral on SNN.
The company next reports on Nov. 4.
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