On Friday’s dramatic slide and surge in the ASX, shares in hearing implant maker, Cochlear stood out with a leap of 21%. On Monday they dived up to 20% after the company issued its second earnings downgrade caused by the coronavirus, COVID-19 and warned that it is cutting all non-essential spending except for CAPEX. But it made clear staff numbers would not be cut.
UBS is not surprised by the company's decision to raise up to $850m, considering the sudden deterioration in the operating environment and the likelihood of paying out $380m in penalties following the lost patent infringement case.
FY20 profit guidance is downgraded by up to -7% because of the impact of coronavirus in greater China. Management has not witnessed any impact outside of greater China and is not making any changes to the cost base.
The 2019 AGM has reaffirmed FY20 net profit guidance of $290-300m, which represents 9-13% growth on FY19. Morgan Stanley notes growth is expected to continue across the business and investment is aimed at building awareness.
Citi expects net profit in FY19 of $275m, at the top end of guidance. The broker suspects market growth in North America will be lower than the prior corresponding period as Cochlear may have been more focused on protecting market share.
Cochlear hosted an investor day on Friday at which no financial updates were provided. The company highlighted the opportunity presented by growth in adult uptake in developed markets along with new initiatives.