Goldman Sachs Upgrades Smiths Group to 'Buy' with 17% Upside Potential

Goldman Sachs has reinstated coverage of Smiths Group () with a 'buy' rating and a price target of 3,150p, implying a 17% upside from its current market value. The engineering company's portfolio overhaul is expected to drive higher margins, stronger returns, and improved long-term growth.

The divestments of Smiths' Detection and Interconnect businesses have simplified the company's structure, leaving it focused on its two strongest operations: John Crane, its highest-margin division, and Flex-Tek, its historically fastest-growing segment. The reshaped business is expected to generate margins about 280 basis points higher than before.

Goldman estimates that Smiths will return approximately £2.7 billion through share buybacks over fiscal 2026-2028, the largest capital return programme within its European industrials coverage. While acknowledging some near-term headwinds, Goldman expects improving demand from a recovery in oil and gas capital expenditure to support stronger earnings growth.