UPDATE 2-Smith & Nephew Q3 revenue up; guidance unchanged

* Q3 revenue $941 mln (I/B/E/S poll $928.9 mln)

* Q3 EPS 16.1 cents (I/B/E/S 17.0 cents)

* Keeps guidance unchanged

* Shares up 4.4 pct

(Adds CEO comments, analyst reaction, shares)

By Paul Sandle

LONDON, Nov 5 (BestGrowthStock) – Smith & Nephew (SN.L: ), Europe’s
largest maker of replacement knees and hips, beat third-quarter
expectations after it stepped up marketing to consumers in the
United States, helping it take share in a tough market.

The company, which also has endoscopy and woundcare units,
posted a 4 percent rise in trading profit to $215 million on
revenue of $941 million, also up 4 percent and ahead of analyst
expectations for $928.9 million, for the three months to Oct. 2.

Shares in the group rose as much as 6.9 percent to a 15-week
high as analysts said Smith & Nephew had done better than U.S.
rivals. They were 4.4 percent higher at 583 pence at 0920 GMT.

“This has been a solid quarter for the business, contrasting
with the cries of woe from its U.S. peers, and management is
maintaining its full-year outlook from the second quarter,” said
Seymour Pierce analyst Mike Mitchell.

“Sensitivity to the younger, insured patient market in
elective surgery will remain while the economic recovery is
sluggish, but the rest of the business more than compensates.”

Chief Executive David Illingworth said the performance was
“robust” in markets still hurt by a tough economic environment.

“Reconstruction has outperformed the market rate, driven by
strong growth in our knee business,” he told reporters in a call
on Friday. “Our trauma business also continues to improve and
delivered revenue growth at the market rate.”

Its orthopaedics business grew 2 percent in the U.S., fell 1
percent in Europe and grew 6 percent elsewhere in the quarter.

Younger patients have delayed reconstructive surgery, such
as knee repairs after sports injuries, because they are
reluctant to take time off work.

Illingworth said the company was seeing headwinds for its
high-spec orthopaedics products, but was probably taking share
in its traditional products targeted at an older population.

The group also saw pricing pressure, reflecting austerity
measures in all markets, he said. “Like-for-like pricing is
between 1 and 2 percent on an annualised basis,” he said.

DIRECT CAMPAIGN

Smith & Nephew is pushing its Birmingham Hip Resurfacing
system, which Illingworth said had been sucked into the
controversy over competitors’ metal-on-metal products, and its
knee-replacement technology.

“We went out with an aggressive, direct-to-consumer ad
campaign and quite frankly it worked well for us,” he said.

“In knees, Verilast has a 30-year wear claim approved by the
FDA. It’s this type of innovation that has led our knee
performance in the quarter (up 6 percent) to be market leading.”

Rival Zimmer Holdings (ZMH.N: ) said sales of knee replacement
products were weak in the third quarter, though peer Stryker
(SYK.N: ) posted higher U.S. sales helped by strong shipments of
orthopaedic implants. [ID:nN28104416] [ID:nN19253675]

Smith & Nephew’s endoscopy business grew revenue by 4
percent to $201 million, while sales at its advanced wound
management unit were 7 percent higher at $230 million.

The group reiterated guidance of growing close to the market
rate in reconstruction, and above it in endoscopy and wound.

Analysts expected the company to report adjusted earnings
per share of 17.0 cents on revenue of $928.9 million, according
to a Thomson Reuters I/B/E/S poll of eight brokers.

(Editing by James Davey and David Hulmes)

UPDATE 2-Smith & Nephew Q3 revenue up; guidance unchanged