Smith & Nephew, the maker of artificial hips and knees, was the biggest riser on the FTSE 100 index by late morning, overtaking ITV, after Exane BNP Paribas upgraded its rating on S&N to "outperform" from "neutral".
The broker, which left its target price for the stock unchanged at 700p, said:
Many investors doubt S&N can deliver new savings after the 2007-10 earnings improvement programme, but we are more optimistic and would play the better earnings momentum, thanks to the new $150m savings plan.
The orthopaedic's market growth of 3-5% looks sustainable in 2011-13, with low growth in US/Europe offset by "booming" emerging markets. This would ease investors' fears, with potential upside to battered multiples. It is time to reconsider the story.
The shares climbed 21.5p, or 3.85%, to 579.5p, outperforming the FTSE which turned negative late morning, trading down more than 30 points at 5515.
