Smith & Nephew (SN.L): Two (or 1.5) out of three issues addressed. Mid-term driven sector bounce driving a squeeze

Going into the results, we thought the company needed to address 1) FY26 guidance; 2) mid-term guidance; 3) strategic review. Investors got 1 and a slightly wooly 3. Number two will be addressed at FY26 results in February. We think FY27 growth will be better than FY26 given new launches, but management would like more data on the current slower ortho market. Orthopaedics returned to growth (+2.5% underlying), yet US knees (-7.3%) and hips (-1.0%) continued to decline, which the company attributes to prior surgeon losses and a c200bps market slowdown concentrated in knees. AWM declined 0.2%, with Bioactives down 8.8% offset by Advanced Wound Devices up 10.7%, and management cited largely transient factors such as UK NHS tender recontracting and German wholesale shifts, guiding to a Q4 return to growth. Management declined to confirm FY27 margin expansion or reaffirm the 6-7% revenue and 9-10% profit CMD targets, and confirmed the J&J talks have ended while it continues to explore strat