Up 10% in 2025, can this FTSE 100 recovery share keep soaring?

Healthcare giant Smith & Nephew‘s (LSE:SN) shares continue to rise sharply from last autumn’s lows. At £11, the FTSE 100 share has risen 9.9% since the start of 2025.

The company — which builds artificial joints and limbs, surgical robotics, and sports medicine and woundcare products — has been troubled in recent years by soaring costs and sales weakness in China.

But fresh financials on Tuesday (25 February) have boosted hopes that Smith & Nephew’s turnaround is gaining momentum. News of soaring sales, margins, and profits in 2024 have given the share price an extra dose of jet fuel.

So what’s going on? And should investors consider buying the Footsie share today?

Sales accelerate

Tuesday’s update underlines the impressive progress of Smith & Nephew’s ’12-Point Plan,’ introduced in 2022 to slash costs, reduce waste, and boost commercial execution.

Sales rose 5.3% in 2024, to $5.8bn, with revenue growth accelerating to 8.3% in the final quarter. Trading profit improved 8.2% over the year to a shade over $1bn, helped by a strong improvement in trading profit margin.

This increased to 18.1% from 17.5% in 2023.

Pricing pressures and regulatory changes in China remained a familiar problem for Smith & Nephew. The firm said it experienced “reduced end-customer demand in the second half of the year, resulting in orders from our distribution partners significantly slowing as they reduced stock-levels“.

But this was more than offset by strong demand in established markets, particularly in the US. Full-year turnover in there increased 4.8%, to $3.1bn.

Restructuring on point

Tuesday’s release has reinforced hopes that Smith & Nephew (and its share price) have turned the corner following years of turbulence.

With the 12-Point Plan rolling on, annual revenues are on course to rise another 4.8% in 2025, the business says. It also expects the trading profit margin to increase further, to between 19% and 20%.

Strong progress on R&D leaves the business looking in good shape further out, too. It’s launched 16 new products in 2024, taking the total number during the last three years to 50. Planned new rollouts in 2025 include further extensions to its CORI and AETOS robotics-assisted surgical systems.

Its new innovations create considerable long-term potential for the company. As Smith & Nephew noted: “many of these new platforms are driving growth today and have multi-year runways still ahead of them as we expand indication and applications and launch in new markets.”

The verdict

Supported by new products, continued restructuring, and rising global healthcare spending, things are looking good for Smith & Nephew’s turnaround story.

City analysts agree. They think annual profits will rise 23% in 2025, and by a further 13% next year.

Yet, despite the company’s strong progress, significant earnings risks still remain. Sales challenges in China are persisting, meaning distributor inventories are still unusually high. The business is also vulnerable to further exchange rate volatility (currency movements dented sales by 0.5% in 2024).

So what should investors do today?

On balance, I think Smith & Nephew shares are worth a close look today given its current momentum. With a sub-1 price-to-earnings growth (PEG) ratio of 0.6, I think it offers good value for money, even following recent price strength.

The post Up 10% in 2025, can this FTSE 100 recovery share keep soaring? appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Smith & Nephew Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.