It looks like the third quarter was pretty tough for British orthopedic company Smith & Nephew (NYSE:SNN), but we knew that was going to be the case when the company preannounced back in September. More or less as expected, revenue was up about 10%, operating profit rose about 11%, and earnings per American Depository Share climbed about 9%.

Sales were led by relatively strong orthopedic revenue, up 15%, while wound management and endoscopy grew at low-single-digit and high-single-digit rates, respectively. Performance in orthopedics was broadly OK, as knee sales rose 13%, hip sales climbed 10%, and the trauma business was up 15%. That suggests some share growth in hips; the knee business gave up a little share in the U.S., though it probably gained somewhat overseas.

I've talked about the expected doldrums for the orthopedics market, but Smith & Nephew might have a few aces up its sleeve. The company's launch of a new hip resurfacing system should produce a sales bump, since Smith & Nephew will be only the second player in the market behind Biomet (NASDAQ:BMET). Likewise, the introduction of a new revision knee product should help Smith & Nephew compete better against Biomet and Zimmer (NYSE:ZMH) alike.

The trouble with Smith & Nephew, though, is that it's a smaller player in this market. Though a bit bigger than Biomet in terms of revenue, it's smaller than Zimmer, Stryker (NYSE:SYK), and Johnson & Johnson's (NYSE:JNJ) Depuy business. A smaller revenue base makes it more difficult to maintain profitability and simultaneously match your rivals' research and development spending. Plus, as more customers talk about consolidating their orthopedic buys to just one or two major players, there's a risk that Smith & Nephew will be left out in the cold at some accounts.

The entire orthopedic sector is getting pretty interesting from a value perspective. I'm more inclined to go with Stryker as a bet on an industry recovery, but if Smith & Nephew's newer products live up to their potential, current growth expectations might prove to be too conservative, and the stock could do well.

Bone up on the orthopedics business:

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Fool contributor Stephen Simpson owns shares of Johnson & Johnson. The Motley Fool has a disclosure policy.