CSL falls short, despite $8.48 billion revenue
Plasma is still a winner for the healthcare giant, but vaccinations face hurdles.
Only a few short years ago, we watched the greatest global vaccination drive in living history take place. It seems ironic therefore that vaccinations are behind CSL’s (ASX: CSL) reporting miss this season. Though, perhaps it’s simply a matter of ongoing post-pandemic fatigue and apathy - or related to US politics. It’s not been a mild flu season to account for lower rates – in fact, the flu has peaked twice in the US and there has been rising hospitalisation in some states.
CSL Seqirus, the vaccination segment, was affected by low influenza vaccination rates in the US, dragging down overall revenue. By contrast, the crown jewel, plasma business CSL Behring, continued to offer strength with 10% growth in revenue. Even iron deficiency and anaemia business CSL Vifor had positive growth in its revenue, though analysts remain sceptical of the price CSL paid for it.
On the surface, CSL’s results should be a positive – a 5% lift in revenue and jump in net profit and, pleasingly for many investors, an increase by 9% to the dividends per share. However, market consensus had been for more: bigger net profit, bigger revenue and bigger interim dividends meaning some (albeit small) declines in price in the hours after reporting.
With CSL maintaining its guidance for the rest of the financial year, and generally positioned as a strong buy across brokers, I spoke to Dr Shane Storey from Wilsons Advisory for his take on the results. And a spoiler… he thinks investors should be paying closer attention to the biotech market and emerging competitors before they get too confident about CSL’s plasma business.
CSL half-year FY25 results
- Revenue up 5% to $8.48 billion vs. $8.54 consensus (0.7% miss)
- NPATA up 3% to $2.07 billion vs. $2.16bn consensus (4.1% miss)
- Earnings per share up 3% to $4.29
- Interim dividend of $1.30 per share vs. Morgan estimates of $1.35 per share (3.7% miss)
- Converted to Australian dollars, the interim dividend is approximately A$2.08 per share, up 16% year-on-year
- Reaffirmed FY25 NPATA guidance of $3.2 billion to $3.3 billion at constant currency, representing year-on-year growth of 10-13%
CSL share price over the last 12 months
What was the key takeaway from this result?
The CSL Behring margin piece is firmly on track. We saw really good evidence in both the base fractionation margin, which has lagged and has been the repair job in the last couple of periods.
That was positive as well as some of the high margin things coming in the subsequent periods. That'll help that further. So that's the main thing. The margin piece looks okay.
Were there any surprises in this result that you think investors need to be aware of?
Seqiris was a shock. The vaccine business missed by 20%. That was hugely unexpected.
Would you buy, hold or sell CSL off the back of this result?
HOLD
I'm a Hold and I don't think this result changes that sentiment.
I thought it was a good result. It's within guidance, but the composition is probably going to give investors a bit of pause just as they think how the second half plays out and what to make the ideas and where it's trading $270, it's still a premium to global pharma.
'I think there might be a perception that it’s cheap, but that’s more than likely based on the share price rather than what the valuation means compared to global comparable companies.
I see it as almost expensive and that's why we've been neutral on it for a while, trying to understand the valuation and where it's going.
Are there any risks that investors need to be aware of?
I think investors need to be monitoring really carefully what's happening in the biotech industry and companies seeking to compete with plasma derived therapies. It really is a new guard there looking to compete.
So far I feel like the market is kind of dismissing it, thinking it's all going to be okay. The plasma markets are still themselves growing quite rapidly, so it's hard to see whether there's any share being lost or taken. There are a lot of interesting targets now reaching phase three studies that are worth monitoring.
From 1 to 5, where 1 is cheap and 5 is expensive, how much value do you see in the market?
Rating = 4
We're probably sitting at about a four in terms of preparedness to go and do things new.
One of the reasons for that is there are very few stories where the earnings outlook is crystal clear. There are very few of those. So most of them are a little bit challenged and therefore valuations haven't really removed very much. Then, the thought is maybe the market is a bit expensive.
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Sara is a Content Editor at Livewire Markets. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and Macquarie Group. She also holds a degree in psychology which drives a continued fascination with how human behaviour drives and is driven by investments and market activity.
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Sara is a Content Editor at Livewire Markets. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and...
Sara is a Content Editor at Livewire Markets. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and...
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