High Expectations Hurt CSL

By Glenn Dyer | More Articles by Glenn Dyer

The major report of the day yesterday came from the country’s premier healthcare and tech stock – CSL Ltd, but while the company out performed its guidance, it missed slightly on some analyst and market estimates and the shares were weaker.

It is another example of shareholders losing out when analysts are too optimistic.

CSL reported (http://www.csl.com.au/docs/452/839/CSL%20-%20FY17%20ASX%20release%20-%20FINAL.pdf) a 24% rise in underlying net profit for the year to 30 June, and management reckons it can back up this financial year with another solid effort with a rise of 11% to 16% pencilled in – or around $US1.48 billion to $US1.55 billion.

The company said net profit of $US1.34 billion ($A1.67 billion), was up 8% as reported and 24% on an underlying basis at constant currencies, on sales of $US6.92 billion, up 15% at constant currencies.

A year ago CSL was looking for a 10%-18% rise in underlying profit for 2016-17 which was easily exceeded. But it was a bit short of some analyst forecasts for a figure around $US1.37 billion.

That miss and analyst claims the 2017-18 guidance was lower than their estimates, saw the shares down 6% in early trading before the steadied and regained some of those losses over the rest of the day.

But the shares made up most of the early losses to end the day down on 1.5%at $125.27. Don’t be surprised if the shares rise in the next few weeks as the silly analysts try and catchup.

CSL said it expects underlying net profit of $US1.48 billion to $US1.55 billion in 2018.

Full year dividend of $US1.38 a share was up 8% – earnings per share jumped 26% at constant currencies to US3.13, so the amount of retained earnings is substantial. The final was lifted to 72 US cents a share, from 68US cents a year ago.

The company has completed 91% of a $500 million share buyback, but the company yesterday ruled another buyback in 2017-18. CSL said it is looking to raise $US600 million in new debt capital via private placement this year.

The result was driven by strong 16% rise (in constant currency) in sales of CSL’s core immunoglobins – treatments extracted from blood plasma to treat a range of rare immunodeficiency diseases – and a 20% increase in sales of speciality products such as KCentra and Berinert.

The company also reported strong demand for Idelvion – a new drug which CSL says has quickly become the standard treatment for Haemophilia B.

“CSL’s 2017 results were exceptional. Our strong year reflects the successful execution of our strategy,” CSL CEO, Paul Perreault said in the statement.

“We delivered on our promise to provide innovative medicines to patients with rare and serious diseases in more than 60 countries. As a result, our business performance again created significant value for shareholders and other stakeholders.”

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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