Citigroup put a dent in Smith & Nephew PLC (LON:SN.) shares on Tuesday after downgrading its rating for the blue-chip medical products group to ‘neutral’ from ‘buy’ citing the impact of the coronavirus (COVID-19) pandemic.
The US investment bank also cut its earnings per share (EPS) estimates for the FTSE 100-listed firm by 15%-22% and reduced its target price for the stock to 1,700p from 2,250p.
In morning trading, Smith & Nephew shares were 2.2% lower at 1,530p.
In a note to clients on Smith & Nephew, Citigroup’s analysts said: “While we are positive on its prospects longer term, we expect 6-18 difficult months ahead because of postponement of deferrable surgeries due to COVID-19, with limited visibility on the pace of recovery.”
They added: “Our calls with US orthopedic surgeons suggest that the catch-up in deferred procedures will likely take longer than the market expects.”
The analysts also pointed out: “The stock has re-rated significantly from its lows in March, and we think that the
risk-reward is more balanced now, especially as the turnaround will likely take longer due to delayed product launches and reduced commercial activities near term.”