Smith & Nephew PLC’s (Smith & Nephew) revenues remained flat in 3Q 09, in line with our estimate. However, performance at the operating and net levels exceeded our expectations in 3Q 09. Going forward, we maintain our positive outlook for the company, based on new product launches and the earnings improvement program. Considering our positive outlook and current ADR price levels we maintain our BUY rating for the ADR. We will reassess our target price and rating in our 3Q 09 update report. We are likely to take a 6-12 month investment horizon as we now anticipate a significant negative currency impact on the UK stock over the medium term1. Despite our positive fundamental outlook we reiterate a HOLD rating for the UK stock as we expect a significant negative currency impact on the UK stock in the medium term. We will reassess our target price and rating in our 3Q 09 update report.

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