RSS Galvan Chartbreaker - SMITHS GROUP IN FOCUS (1,331p) - 3rd May 2011
By Ed Woolfitt | 03 May 2011, 10:48 BST
Ed Woolfitt, Head of Trading at Galvan
At the end of March, medical devices to airport scanners maker Smiths Group reported a strong increase in half-year profits. The company grew profit before tax for the six months to 29 January to £188.6m from £148.2m a year ago, and headline profit, (which excludes lots of one-off items) by 25% to £224m. Revenue was up by 7%, or 2% on an underlying basis, to £1.37bn from £1.28bn. Over a third of the increase was attributed to currency gains on overseas sales. Smiths Group had previously rejected a £2.45bn approach in January for its biggest division, Smiths Medical, where sales fell 2% during the period, but headline operating profit rose 5%.
The move by Smiths Group to stand by it's strong fundamentals and reject a bid for Smiths Medical in January was amply justified by the March half year profits jump, helped along by favourable currency movements. The post Bin Laden terror jitters also put the airport scanner group in positive focus currently, and accordingly shares are rated a buy at Galvan Research.
The near term charting picture at Smiths Group is backed up by the presence of a rising trend channel from June currently based at 1,300p. While the price action remains above this channel support line, the upside for the shares should at least result in a retest of this year's 1,400p plus peak.
| Dream Scenario | Dollar weakness continues to boost the bottom line at Smiths Group. | Stock | Smiths Group |
| Nightmare Scenario | The market views the profits jump as too dependent on favourable currency movements. | Epic Code | SMIN |
| Price Target | 1,400p | Year High | 1,429p |
| Stop Loss | 1,299p | Year Low | 1,008p |
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Source: Galvan Research and Trading
