Key insights
- Smith+Nephew reported strong Q1 2026 revenue growth, particularly in emerging markets, but its stock declined 2.94% in premarket trading. Despite positive fundamentals and reaffirmed full-year guidance, investor sentiment appears mixed. The stock's decline, despite being undervalued according to some metrics, suggests potential market overreaction or sector-specific concerns that could ripple into US-listed medical device companies.
Smith+Nephew reported its first-quarter 2026 earnings, revealing a revenue of $1.5 billion, which aligns with the company’s forecast. The company experienced a 6.6% growth in revenue, supported by a favorable foreign exchange environment. Despite these positive results, the stock saw a 2.94% decline in premarket trading, reflecting mixed investor sentiment.
Smith+Nephew’s Q1 performance was marked by robust revenue growth, particularly in emerging markets, which saw a 10.5% increase. This growth was driven by strong demand in regions outside China and strategic product launches. The company’s sports medicine and advanced wound management divisions also contributed positively, with notable advancements in product offerings.
Despite the positive revenue growth, Smith+Nephew’s stock price declined by 2.94% in premarket trading. The stock was priced at $30.39, down from the previous close of $31.31. This movement contrasts with broader market trends, where similar firms have shown stable performance.
The decline appears disconnected from fundamentals, as InvestingPro analysis suggests the stock is currently undervalued relative to its Fair Value, placing it among opportunities on the Most Undervalued list. With a PEG ratio of 0.41 and a P/E of 21.87, the company trades at an attractive valuation relative to its growth prospects.
Smith+Nephew reaffirmed its full-year 2026 guidance, projecting approximately 6% organic revenue growth and 8% organic trading profit growth. The company anticipates stronger growth in the second half of the year, with significant contributions expected from new product launches and strategic investments.
CEO Roland Diggelmann highlighted the company’s innovation-driven growth, stating, "Our commitment to innovation is evident in our strong Q1 performance, with new product launches accounting for more than half of our growth." He emphasized the strategic importance of maintaining momentum in emerging markets and expanding the company’s product portfolio.
During the earnings call, analysts focused on the company’s strategy for maintaining growth in emerging markets and the impact of recent product launches on future performance. Concerns were raised about the potential effects of supply chain issues and reimbursement changes on profitability. Executives reassured stakeholders of their proactive measures to mitigate these risks.
For investors seeking deeper analysis, Smith+Nephew is among the 1,400+ US equities covered by comprehensive Pro Research Reports, which transform complex financial data into clear, actionable intelligence through intuitive visuals and expert analysis.
Sarah, Moderator, Smith+Nephew: Good morning. Thank you for attending today’s Smith+Nephew quarter 1 trading report. My name is Sarah, and I’ll be your moderator today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you’d like to ask a question, press star 1 on your telephone keypad. I’d like to pass the conference over to our host, Deepak Nath, Chief Executive Officer. Please go ahead.
Deepak Nath, Chief Executive Officer, Smith+Nephew: Thank you. Good morning and welcome to our Smith+Nephew first quarter 2026 trading update. As just mentioned, I’m Deepak Nath. I’m the Chief Executive Officer. I’m joined today by John Rogers who’s our Chief Financial Officer. We’ve made a good start to the year. In the first quarter, we delivered 3.1% underlying growth or 4.7% on an adjusted daily basis, which was in line with our expectations. Performance across the group was positive overall, with growth across all business units and regions. We saw strong growth in Sports Medicine and resilient results in Advanced Wound Management despite the headwind from CMS changes to skin substitute reimbursement. As expected, U.S. knees were softer in the quarter, reflecting deliberate trade-offs and continued focus on disciplined execution.
The rest of Orthopaedics delivered solid performance. This underscores the strength of having a well-balanced, diversified portfolio. Innovation continues to be a key driver of our performance, accounting for more than half of our growth. We saw strong momentum across a broad range of products spanning all business units, including CATALYSTEM, AETOS, Q-FIX, REGENETEN, CARTIHEAL AGILI-C, FASTSEAL, OASIS, and LEAF. Overall, our Q1 performance supports our confidence in the full-year outlook, which remains unchanged. We expect growth to strengthen over the remainder of the year, driven by the ramp-up of new product launches, stabilization in U.S. skin substitutes, an improving trajectory in U.S. knees, as well as an additional trading day in the fourth quarter. Today, we are also announcing that after 7 years with the group, including the last 2 as the President of Orthopaedics, Craig Gaffin will be leaving Smith+Nephew to pursue a new opportunity.
We have appointed a highly qualified successor, Nathan Folkert, who will join us later in the month. I’ll return to this later in the call. I’m pleased to announce a $500 million share buyback. This reflects our strong balance sheet and confidence in our 2026 performance and demonstrates our continued commitment to a balanced approach to capital deployment, supporting future growth while returning incremental value to shareholders. With that, I’ll now hand over to John to take you through the financial performance in more detail.
John Rogers, Chief Financial Officer, Smith+Nephew: Thank you, Deepak. Revenue for the quarter was $1.5 billion, representing +3.1% underlying growth and +6.6% reported, including a 350 basis points tailwind for foreign exchange. Those growth rates include the effect of one fewer trading day compared to the first quarter of 2025, on an adjusted daily sales basis, underlying growth was 4.7%. Geographically, the U.S. grew 2.1%, and other established markets grew 1%. Emerging markets grew 10.5%, and excluding China, growth was 2.9% on an underlying basis. We expect China to be broadly neutral to growth for the full year, making it the first time since 2021 that it will not be a major headwind to revenue growth.
Let me now take you through the business units in more detail. I’ll start with Sports Medicine & ENT, which grew 6.7%. Within sports med, all regions contributed to growth. We saw double-digit growth in joint repair, driven by Q-FIX KNOTLESS, REGENETEN. CARTIHEAL AGILI-C also grew very strongly, albeit off a small base. We continue to roll out these products in more geographies outside of the U.S., primarily across Europe. It’s still very early for Tendon Seam, which we acquired with Integrity Orthopaedics earlier this year, but integration is progressing well. AET growth was led by FASTSEAL and services. In China, we had intentionally restricted inventory in the channel at the end of last year, and with the implementation of VBP delayed by a few months, we saw strong demand for our products there during the quarter.
We now expect VBP to be implemented at the beginning of the second half. As a result of this strong performance, our sports medicine revenue exceeded our recon and robotics revenue for the first time ever, and we expect that to continue to be the case going forward. Turning to ENT, we saw particular strength in other established markets in Latin America, as well as in our ARIS ablation wands for turbinate reduction. In China, we continue to reduce inventory in the channel ahead of VBP implementation, which had a negative impact on our growth. We still expect a profit headwind from China VBP in 2026 to be around $15 million-$20 million. Let’s now look at advanced wound management, which grew +2.2% in the quarter.
Within that, advanced wound care grew 4.9% with good growth overall led by ALLEVYN Life and strength in emerging markets. Our ALLEVYN COMPLETE CARE launch in the U.S. is off to a strong start. It takes time to win new contracts, but we’re pleased with what we’re seeing so far, and we’ll be expanding the launch into Europe in the second quarter. Turning to bioactives, which were down 1.7% for the quarter. We saw strong growth in SANTYL offset by a decline in skin substitutes. As a reminder, our skin substitutes business is facing headwinds in the U.S. as a result of CMS reimbursement changes that came into effect at the start of the year. This is driving a decline in both volumes and pricing in non-surgical settings, particularly in mobile, where we have limited exposure.
We have also seen reduced billing efficiency and elevated inventory clearing in the system. The market is adapting slowly to these changes, the impact we are seeing on our business is in line with our expectations. We set out our full year outlook. We contemplated a range of outcomes, we continue to expect the trading profit headwind for the full year to remain within the $20 million-$40 million range we previously guided to. Looking ahead, we remain convinced of the long-term attractiveness of the skin substitute segment beyond this transition year. Advanced wound devices grew 1.9%, partly reflecting a strong prior year comparative. LEAF and PICO both performed well, reflecting good demand. PICO growth reflects our focused efforts to improve penetration in the surgical setting.
Sales of RENASYS in the U.S. continue to be soft in the acute care channel, while performance in the post-acute channel remains strong, and we’re continuing to expand into emerging markets. Orthopaedics grew 0.8% on an underlying basis. In the U.S., hips grew above market for the 4th consecutive quarter, driven again by the strong uptake of CATALYSTEM, particularly in competitive accounts. Trauma and extremities also grew strongly, driven by EVOS, shoulder, and INTERTAN Nails. These results reflect sustained momentum in segments where we have benefited from the combination of a strengthened commercial organization and a differentiated portfolio. Where our portfolio aligns wi